Correlation Between Carlton Investments and Medibank Private

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

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

Diversification Opportunities for Carlton Investments and Medibank Private

0.57

Correlation Coefficient

Carlton Investments  Medibank Private

Very weak diversification

The 3 months correlation between Carlton and Medibank is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Carlton Investments and Medibank Private in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medibank Private and Carlton Investments 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 Carlton Investments are associated (or correlated) with Medibank Private. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medibank Private has no effect on the direction of Carlton Investments i.e., Carlton Investments and Medibank Private go up and down completely randomly.

Pair Corralation between Carlton Investments and Medibank Private

Assuming the 90 days trading horizon Carlton Investments is expected to generate 4.91 times less return on investment than Medibank Private. But when comparing it to its historical volatility, Carlton Investments is 1.06 times less risky than Medibank Private. It trades about 0.02 of its potential returns per unit of risk. Medibank Private is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  366.00  in Medibank Private on October 8, 2024 and sell it today you would earn a total of  16.00  from holding Medibank Private or generate 4.37% return on investment over 90 days.

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

Carlton Investments  vs.  Medibank Private

Carlton Investments

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Carlton Investments are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Carlton Investments is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Medibank Private

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Medibank Private are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Medibank Private is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Carlton Investments and Medibank Private

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

The idea behind Carlton Investments and Medibank Private 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.