Correlation Between Medical Facilities and CHAR Technologies

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

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

Diversification Opportunities for Medical Facilities and CHAR Technologies

-0.75

Correlation Coefficient

Medical Facilities  CHAR Technologies

Pay attention - limited upside

The 3 months correlation between Medical and CHAR is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Medical Facilities and CHAR Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHAR Technologies 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 CHAR Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHAR Technologies has no effect on the direction of Medical Facilities i.e., Medical Facilities and CHAR Technologies go up and down completely randomly.

Pair Corralation between Medical Facilities and CHAR Technologies

Assuming the 90 days horizon Medical Facilities is expected to generate 0.36 times more return on investment than CHAR Technologies. However, Medical Facilities is 2.81 times less risky than CHAR Technologies. It trades about 0.15 of its potential returns per unit of risk. CHAR Technologies is currently generating about -0.04 per unit of risk. If you would invest  871.00  in Medical Facilities on October 5, 2024 and sell it today you would earn a total of  670.00  from holding Medical Facilities or generate 76.92% return on investment over 90 days.

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

Medical Facilities  vs.  CHAR Technologies

Medical Facilities

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Facilities are ranked lower than 9 (%) 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.

CHAR Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHAR Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Medical Facilities and CHAR Technologies

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

The idea behind Medical Facilities and CHAR Technologies 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.