Correlation Between Advanced Medical and Power Metal

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

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

Diversification Opportunities for Advanced Medical and Power Metal

0.09

Correlation Coefficient

Advanced Medical  Power Metal

Significant diversification

The 3 months correlation between Advanced and Power is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Medical Solutions and Power Metal Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Metal Resources and Advanced 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 Advanced Medical Solutions are associated (or correlated) with Power Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Metal Resources has no effect on the direction of Advanced Medical i.e., Advanced Medical and Power Metal go up and down completely randomly.

Pair Corralation between Advanced Medical and Power Metal

Assuming the 90 days trading horizon Advanced Medical Solutions is expected to generate 1.17 times more return on investment than Power Metal. However, Advanced Medical is 1.17 times more volatile than Power Metal Resources. It trades about 0.1 of its potential returns per unit of risk. Power Metal Resources is currently generating about 0.04 per unit of risk. If you would invest  19,700  in Advanced Medical Solutions on December 30, 2024 and sell it today you would earn a total of  4,000  from holding Advanced Medical Solutions or generate 20.3% return on investment over 90 days.

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

Advanced Medical Solutions  vs.  Power Metal Resources

Advanced Medical Sol

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Medical Solutions are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Advanced Medical exhibited solid returns over the last few months and may actually be approaching a breakup point.

Power Metal Resources

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Power Metal Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Power Metal may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Advanced Medical and Power Metal

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

The idea behind Advanced Medical Solutions and Power Metal Resources 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.