Correlation Between Diagnostic Medical and Plant Advanced

Can any of the company-specific risk be diversified away by investing in both Diagnostic Medical and Plant Advanced 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 Plant Advanced 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 Plant Advanced Technologies, you can compare the effects of market volatilities on Diagnostic Medical and Plant Advanced 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 Plant Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diagnostic Medical and Plant Advanced.

Diversification Opportunities for Diagnostic Medical and Plant Advanced

0.59

Correlation Coefficient

Diagnostic Medical  Plant Advanced

Very weak diversification

The 3 months correlation between Diagnostic and Plant is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Diagnostic Medical Systems and Plant Advanced Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plant Advanced Techn 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 Plant Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plant Advanced Techn has no effect on the direction of Diagnostic Medical i.e., Diagnostic Medical and Plant Advanced go up and down completely randomly.

Pair Corralation between Diagnostic Medical and Plant Advanced

Assuming the 90 days trading horizon Diagnostic Medical Systems is expected to generate 1.66 times more return on investment than Plant Advanced. However, Diagnostic Medical is 1.66 times more volatile than Plant Advanced Technologies. It trades about -0.06 of its potential returns per unit of risk. Plant Advanced Technologies is currently generating about -0.14 per unit of risk. If you would invest  89.00  in Diagnostic Medical Systems on October 26, 2024 and sell it today you would lose (15.00) from holding Diagnostic Medical Systems or give up 16.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Diagnostic Medical Systems  vs.  Plant Advanced Technologies

Diagnostic Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diagnostic Medical Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Plant Advanced Techn

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Plant Advanced Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Diagnostic Medical and Plant Advanced

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

The idea behind Diagnostic Medical Systems and Plant Advanced Technologies 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.