Correlation Between Medical Facilities and Asiabasemetals

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

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

Diversification Opportunities for Medical Facilities and Asiabasemetals

-0.44

Correlation Coefficient

Medical Facilities  Asiabasemetals

Very good diversification

The 3 months correlation between Medical and Asiabasemetals is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Medical Facilities and Asiabasemetals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asiabasemetals and Medical Facilities 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 Medical Facilities are associated (or correlated) with Asiabasemetals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asiabasemetals has no effect on the direction of Medical Facilities i.e., Medical Facilities and Asiabasemetals go up and down completely randomly.

Pair Corralation between Medical Facilities and Asiabasemetals

Assuming the 90 days horizon Medical Facilities is expected to generate 3.78 times less return on investment than Asiabasemetals. But when comparing it to its historical volatility, Medical Facilities is 6.29 times less risky than Asiabasemetals. It trades about 0.11 of its potential returns per unit of risk. Asiabasemetals is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  7.00  in Asiabasemetals on October 11, 2024 and sell it today you would earn a total of  0.50  from holding Asiabasemetals or generate 7.14% return on investment over 90 days.

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

Medical Facilities  vs.  Asiabasemetals

Medical Facilities

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Facilities are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Medical Facilities may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Asiabasemetals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Asiabasemetals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Asiabasemetals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Medical Facilities and Asiabasemetals

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

The idea behind Medical Facilities and Asiabasemetals 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.