Correlation Between VARIOUS EATERIES and MEDICAL FACILITIES

Can any of the company-specific risk be diversified away by investing in both VARIOUS EATERIES and MEDICAL FACILITIES at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining VARIOUS EATERIES and MEDICAL FACILITIES into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between VARIOUS EATERIES LS and MEDICAL FACILITIES NEW, you can compare the effects of market volatilities on VARIOUS EATERIES and MEDICAL FACILITIES and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in VARIOUS EATERIES with a short position of MEDICAL FACILITIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of VARIOUS EATERIES and MEDICAL FACILITIES.

Diversification Opportunities for VARIOUS EATERIES and MEDICAL FACILITIES

-0.29

Correlation Coefficient

VARIOUS EATERIES  MEDICAL FACILITIES

Very good diversification

The 3 months correlation between VARIOUS and MEDICAL is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding VARIOUS EATERIES LS and MEDICAL FACILITIES NEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEDICAL FACILITIES NEW and VARIOUS EATERIES is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on VARIOUS EATERIES LS are associated (or correlated) with MEDICAL FACILITIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEDICAL FACILITIES NEW has no effect on the direction of VARIOUS EATERIES i.e., VARIOUS EATERIES and MEDICAL FACILITIES go up and down completely randomly.

Pair Corralation between VARIOUS EATERIES and MEDICAL FACILITIES

Assuming the 90 days horizon VARIOUS EATERIES LS is expected to under-perform the MEDICAL FACILITIES. But the stock apears to be less risky and, when comparing its historical volatility, VARIOUS EATERIES LS is 1.62 times less risky than MEDICAL FACILITIES. The stock trades about -0.13 of its potential returns per unit of risk. The MEDICAL FACILITIES NEW is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  890.00  in MEDICAL FACILITIES NEW on October 5, 2024 and sell it today you would earn a total of  130.00  from holding MEDICAL FACILITIES NEW or generate 14.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

VARIOUS EATERIES LS  vs.  MEDICAL FACILITIES NEW

VARIOUS EATERIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VARIOUS EATERIES LS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

MEDICAL FACILITIES NEW

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days MEDICAL FACILITIES NEW has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, MEDICAL FACILITIES reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VARIOUS EATERIES and MEDICAL FACILITIES

The main advantage of trading using opposite VARIOUS EATERIES and MEDICAL FACILITIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VARIOUS EATERIES position performs unexpectedly, MEDICAL FACILITIES can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in MEDICAL FACILITIES will offset losses from the drop in MEDICAL FACILITIES's long position.

The idea behind VARIOUS EATERIES LS and MEDICAL FACILITIES NEW pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.