Correlation Between Dentalcorp Holdings and Medical Facilities

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

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

Diversification Opportunities for Dentalcorp Holdings and Medical Facilities

0.55

Correlation Coefficient

Dentalcorp Holdings  Medical Facilities

Very weak diversification

The 3 months correlation between Dentalcorp and Medical is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding dentalcorp Holdings and Medical Facilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Facilities and Dentalcorp Holdings 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 dentalcorp Holdings are associated (or correlated) with Medical Facilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Facilities has no effect on the direction of Dentalcorp Holdings i.e., Dentalcorp Holdings and Medical Facilities go up and down completely randomly.

Pair Corralation between Dentalcorp Holdings and Medical Facilities

Assuming the 90 days trading horizon Dentalcorp Holdings is expected to generate 2.86 times less return on investment than Medical Facilities. In addition to that, Dentalcorp Holdings is 1.13 times more volatile than Medical Facilities. It trades about 0.04 of its total potential returns per unit of risk. Medical Facilities is currently generating about 0.14 per unit of volatility. If you would invest  1,359  in Medical Facilities on September 14, 2024 and sell it today you would earn a total of  202.00  from holding Medical Facilities or generate 14.86% return on investment over 90 days.

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

dentalcorp Holdings  vs.  Medical Facilities

dentalcorp Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in dentalcorp Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Dentalcorp Holdings is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Medical Facilities

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Facilities are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Medical Facilities displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dentalcorp Holdings and Medical Facilities

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

The idea behind dentalcorp Holdings and Medical Facilities 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.