Correlation Between Apex Mining and Medco Holdings

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

By analyzing existing cross correlation between Apex Mining Co and Medco Holdings, you can compare the effects of market volatilities on Apex Mining and Medco Holdings 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 Apex Mining with a short position of Medco Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apex Mining and Medco Holdings.

Diversification Opportunities for Apex Mining and Medco Holdings

0.56

Correlation Coefficient

Apex Mining  Medco Holdings

Very weak diversification

The 3 months correlation between Apex and Medco is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Apex Mining Co and Medco Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medco Holdings and Apex Mining 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 Apex Mining Co are associated (or correlated) with Medco Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medco Holdings has no effect on the direction of Apex Mining i.e., Apex Mining and Medco Holdings go up and down completely randomly.

Pair Corralation between Apex Mining and Medco Holdings

Assuming the 90 days trading horizon Apex Mining is expected to generate 9.17 times less return on investment than Medco Holdings. But when comparing it to its historical volatility, Apex Mining Co is 4.29 times less risky than Medco Holdings. It trades about 0.01 of its potential returns per unit of risk. Medco Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Medco Holdings on September 24, 2024 and sell it today you would lose (2.00) from holding Medco Holdings or give up 14.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	62.8%
Values	Daily Returns

Apex Mining Co  vs.  Medco Holdings

Apex Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apex Mining Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Medco Holdings

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Apex Mining and Medco Holdings

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

The idea behind Apex Mining Co and Medco Holdings 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.