Correlation Between Medical Facilities and CareRx Corp

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

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

Diversification Opportunities for Medical Facilities and CareRx Corp

0.48

Correlation Coefficient

Medical Facilities  CareRx Corp

Very weak diversification

The 3 months correlation between Medical and CareRx is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Medical Facilities and CareRx Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareRx Corp 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 CareRx Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareRx Corp has no effect on the direction of Medical Facilities i.e., Medical Facilities and CareRx Corp go up and down completely randomly.

Pair Corralation between Medical Facilities and CareRx Corp

Assuming the 90 days horizon Medical Facilities is expected to generate 6.06 times less return on investment than CareRx Corp. But when comparing it to its historical volatility, Medical Facilities is 1.18 times less risky than CareRx Corp. It trades about 0.04 of its potential returns per unit of risk. CareRx Corp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  200.00  in CareRx Corp on December 29, 2024 and sell it today you would earn a total of  76.00  from holding CareRx Corp or generate 38.0% return on investment over 90 days.

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

Medical Facilities  vs.  CareRx Corp

Medical Facilities

Risk-Adjusted Performance

Insignificant

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

CareRx Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CareRx Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, CareRx Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Medical Facilities and CareRx Corp

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

The idea behind Medical Facilities and CareRx Corp 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.