Correlation Between Diagnostic Medical and Sidetrade

Can any of the company-specific risk be diversified away by investing in both Diagnostic Medical and Sidetrade 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 Diagnostic Medical and Sidetrade into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Diagnostic Medical Systems and Sidetrade, you can compare the effects of market volatilities on Diagnostic Medical and Sidetrade 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 Diagnostic Medical with a short position of Sidetrade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diagnostic Medical and Sidetrade.

Diversification Opportunities for Diagnostic Medical and Sidetrade

0.69

Correlation Coefficient

Diagnostic Medical  Sidetrade

Poor diversification

The 3 months correlation between Diagnostic and Sidetrade is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Diagnostic Medical Systems and Sidetrade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sidetrade and Diagnostic Medical 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 Diagnostic Medical Systems are associated (or correlated) with Sidetrade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sidetrade has no effect on the direction of Diagnostic Medical i.e., Diagnostic Medical and Sidetrade go up and down completely randomly.

Pair Corralation between Diagnostic Medical and Sidetrade

Assuming the 90 days trading horizon Diagnostic Medical Systems is expected to generate 1.6 times more return on investment than Sidetrade. However, Diagnostic Medical is 1.6 times more volatile than Sidetrade. It trades about 0.18 of its potential returns per unit of risk. Sidetrade is currently generating about 0.06 per unit of risk. If you would invest  70.00  in Diagnostic Medical Systems on December 27, 2024 and sell it today you would earn a total of  30.00  from holding Diagnostic Medical Systems or generate 42.86% return on investment over 90 days.

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

Diagnostic Medical Systems  vs.  Sidetrade

Diagnostic Medical

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Diagnostic Medical Systems are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Diagnostic Medical reported solid returns over the last few months and may actually be approaching a breakup point.

Sidetrade

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sidetrade are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Sidetrade may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Diagnostic Medical and Sidetrade

The main advantage of trading using opposite Diagnostic Medical and Sidetrade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diagnostic Medical position performs unexpectedly, Sidetrade 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 Sidetrade will offset losses from the drop in Sidetrade's long position.

The idea behind Diagnostic Medical Systems and Sidetrade 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.