Correlation Between CSL and Pro Medicus

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

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

Diversification Opportunities for CSL and Pro Medicus

-0.65

Correlation Coefficient

CSL  Pro Medicus

Excellent diversification

The 3 months correlation between CSL and Pro is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding CSL and Pro Medicus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pro Medicus and CSL 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 CSL are associated (or correlated) with Pro Medicus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pro Medicus has no effect on the direction of CSL i.e., CSL and Pro Medicus go up and down completely randomly.

Pair Corralation between CSL and Pro Medicus

Assuming the 90 days trading horizon CSL is expected to under-perform the Pro Medicus. But the stock apears to be less risky and, when comparing its historical volatility, CSL is 2.39 times less risky than Pro Medicus. The stock trades about -0.11 of its potential returns per unit of risk. The Pro Medicus is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  24,860  in Pro Medicus on December 1, 2024 and sell it today you would earn a total of  465.00  from holding Pro Medicus or generate 1.87% return on investment over 90 days.

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

CSL  vs.  Pro Medicus

CSL

Risk-Adjusted Performance

Very Weak

Over the last 90 days CSL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pro Medicus

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pro Medicus are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Pro Medicus 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 CSL and Pro Medicus

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

The idea behind CSL and Pro Medicus 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.