Correlation Between Willow Biosciences and Medicure

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

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

Diversification Opportunities for Willow Biosciences and Medicure

0.68

Correlation Coefficient

Willow Biosciences  Medicure

Poor diversification

The 3 months correlation between Willow and Medicure is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Willow Biosciences and Medicure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medicure and Willow Biosciences 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 Willow Biosciences are associated (or correlated) with Medicure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medicure has no effect on the direction of Willow Biosciences i.e., Willow Biosciences and Medicure go up and down completely randomly.

Pair Corralation between Willow Biosciences and Medicure

Assuming the 90 days horizon Willow Biosciences is expected to under-perform the Medicure. In addition to that, Willow Biosciences is 1.39 times more volatile than Medicure. It trades about -0.03 of its total potential returns per unit of risk. Medicure is currently generating about -0.03 per unit of volatility. If you would invest  80.00  in Medicure on September 5, 2024 and sell it today you would lose (10.00) from holding Medicure or give up 12.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Willow Biosciences  vs.  Medicure

Willow Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Willow Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Medicure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medicure has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward-looking indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Willow Biosciences and Medicure

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

The idea behind Willow Biosciences and Medicure 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.