Correlation Between DIRTT Environmental and Medicus Pharma

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

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

Diversification Opportunities for DIRTT Environmental and Medicus Pharma

-0.14

Correlation Coefficient

DIRTT Environmental  Medicus Pharma

Good diversification

The 3 months correlation between DIRTT and Medicus is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding DIRTT Environmental Solutions and Medicus Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medicus Pharma and DIRTT Environmental 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 DIRTT Environmental Solutions are associated (or correlated) with Medicus Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medicus Pharma has no effect on the direction of DIRTT Environmental i.e., DIRTT Environmental and Medicus Pharma go up and down completely randomly.

Pair Corralation between DIRTT Environmental and Medicus Pharma

Assuming the 90 days trading horizon DIRTT Environmental Solutions is expected to under-perform the Medicus Pharma. But the stock apears to be less risky and, when comparing its historical volatility, DIRTT Environmental Solutions is 1.56 times less risky than Medicus Pharma. The stock trades about -0.03 of its potential returns per unit of risk. The Medicus Pharma is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  290.00  in Medicus Pharma on September 17, 2024 and sell it today you would earn a total of  105.00  from holding Medicus Pharma or generate 36.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

DIRTT Environmental Solutions  vs.  Medicus Pharma

DIRTT Environmental

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DIRTT Environmental Solutions are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, DIRTT Environmental displayed solid returns over the last few months and may actually be approaching a breakup point.

Medicus Pharma

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with DIRTT Environmental and Medicus Pharma

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

The idea behind DIRTT Environmental Solutions and Medicus Pharma 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.