Correlation Between Bright Minds and Medpace Holdings

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

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

Diversification Opportunities for Bright Minds and Medpace Holdings

0.21

Correlation Coefficient

Bright Minds  Medpace Holdings

Modest diversification

The 3 months correlation between Bright and Medpace is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Bright Minds Biosciences and Medpace Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medpace Holdings and Bright Minds 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 Bright Minds Biosciences are associated (or correlated) with Medpace Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medpace Holdings has no effect on the direction of Bright Minds i.e., Bright Minds and Medpace Holdings go up and down completely randomly.

Pair Corralation between Bright Minds and Medpace Holdings

Given the investment horizon of 90 days Bright Minds Biosciences is expected to generate 2.52 times more return on investment than Medpace Holdings. However, Bright Minds is 2.52 times more volatile than Medpace Holdings. It trades about 0.02 of its potential returns per unit of risk. Medpace Holdings is currently generating about -0.03 per unit of risk. If you would invest  3,686  in Bright Minds Biosciences on December 29, 2024 and sell it today you would lose (69.00) from holding Bright Minds Biosciences or give up 1.87% of portfolio value over 90 days.

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

Bright Minds Biosciences  vs.  Medpace Holdings

Bright Minds Biosciences

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bright Minds Biosciences are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Bright Minds is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Medpace Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Medpace Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Medpace Holdings is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Bright Minds and Medpace Holdings

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

The idea behind Bright Minds Biosciences and Medpace Holdings 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.