Correlation Between Covalon Technologies and Medicure

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

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

Diversification Opportunities for Covalon Technologies and Medicure

-0.42

Correlation Coefficient

Covalon Technologies  Medicure

Very good diversification

The 3 months correlation between Covalon and Medicure is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Covalon Technologies and Medicure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medicure and Covalon Technologies 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 Covalon Technologies 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 Covalon Technologies i.e., Covalon Technologies and Medicure go up and down completely randomly.

Pair Corralation between Covalon Technologies and Medicure

Assuming the 90 days horizon Covalon Technologies is expected to generate 0.65 times more return on investment than Medicure. However, Covalon Technologies is 1.54 times less risky than Medicure. It trades about 0.09 of its potential returns per unit of risk. Medicure is currently generating about -0.03 per unit of risk. If you would invest  220.00  in Covalon Technologies on September 13, 2024 and sell it today you would earn a total of  34.00  from holding Covalon Technologies or generate 15.45% return on investment over 90 days.

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

Covalon Technologies  vs.  Medicure

Covalon Technologies

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Covalon Technologies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Covalon Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

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 Covalon Technologies and Medicure

The main advantage of trading using opposite Covalon Technologies and Medicure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Covalon Technologies 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 Covalon Technologies 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.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.