Correlation Between Creative Medical and Therapeutic Solutions

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

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

Diversification Opportunities for Creative Medical and Therapeutic Solutions

0.26

Correlation Coefficient

Creative Medical  Therapeutic Solutions

Modest diversification

The 3 months correlation between Creative and Therapeutic is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Creative Medical Technology and Therapeutic Solutions Internat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Therapeutic Solutions and Creative 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 Creative Medical Technology are associated (or correlated) with Therapeutic Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Therapeutic Solutions has no effect on the direction of Creative Medical i.e., Creative Medical and Therapeutic Solutions go up and down completely randomly.

Pair Corralation between Creative Medical and Therapeutic Solutions

Given the investment horizon of 90 days Creative Medical is expected to generate 3.04 times less return on investment than Therapeutic Solutions. But when comparing it to its historical volatility, Creative Medical Technology is 3.08 times less risky than Therapeutic Solutions. It trades about 0.1 of its potential returns per unit of risk. Therapeutic Solutions International is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.03  in Therapeutic Solutions International on December 22, 2024 and sell it today you would lose (0.01) from holding Therapeutic Solutions International or give up 33.33% of portfolio value over 90 days.

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

Creative Medical Technology  vs.  Therapeutic Solutions Internat

Creative Medical Tec

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Creative Medical Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Creative Medical showed solid returns over the last few months and may actually be approaching a breakup point.

Therapeutic Solutions

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Therapeutic Solutions International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Therapeutic Solutions demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Creative Medical and Therapeutic Solutions

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

The idea behind Creative Medical Technology and Therapeutic Solutions International 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.