Correlation Between Bright Kindle and Medco Holdings

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

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

Diversification Opportunities for Bright Kindle and Medco Holdings

-0.39

Correlation Coefficient

Bright Kindle  Medco Holdings

Very good diversification

The 3 months correlation between Bright and Medco is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Bright Kindle Resources and Medco Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medco Holdings and Bright Kindle 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 Bright Kindle Resources 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 Bright Kindle i.e., Bright Kindle and Medco Holdings go up and down completely randomly.

Pair Corralation between Bright Kindle and Medco Holdings

Assuming the 90 days trading horizon Bright Kindle Resources is expected to generate 0.71 times more return on investment than Medco Holdings. However, Bright Kindle Resources is 1.4 times less risky than Medco Holdings. It trades about 0.04 of its potential returns per unit of risk. Medco Holdings is currently generating about 0.0 per unit of risk. If you would invest  94.00  in Bright Kindle Resources on December 30, 2024 and sell it today you would earn a total of  5.00  from holding Bright Kindle Resources or generate 5.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	44.83%
Values	Daily Returns

Bright Kindle Resources  vs.  Medco Holdings

Bright Kindle Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bright Kindle Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Bright Kindle exhibited solid returns over the last few months and may actually be approaching a breakup point.

Medco Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Medco Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Medco Holdings is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bright Kindle and Medco Holdings

The main advantage of trading using opposite Bright Kindle and Medco Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bright Kindle 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 Bright Kindle Resources 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.