Correlation Between Ecofibre and Pro Medicus

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

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

Diversification Opportunities for Ecofibre and Pro Medicus

-0.51

Correlation Coefficient

Ecofibre  Pro Medicus

Excellent diversification

The 3 months correlation between Ecofibre and Pro is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Ecofibre and Pro Medicus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pro Medicus and Ecofibre 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 Ecofibre are associated (or correlated) with Pro Medicus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pro Medicus has no effect on the direction of Ecofibre i.e., Ecofibre and Pro Medicus go up and down completely randomly.

Pair Corralation between Ecofibre and Pro Medicus

Assuming the 90 days trading horizon Ecofibre is expected to under-perform the Pro Medicus. In addition to that, Ecofibre is 2.23 times more volatile than Pro Medicus. It trades about -0.17 of its total potential returns per unit of risk. Pro Medicus is currently generating about 0.13 per unit of volatility. If you would invest  23,000  in Pro Medicus on September 27, 2024 and sell it today you would earn a total of  2,019  from holding Pro Medicus or generate 8.78% return on investment over 90 days.

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

Ecofibre  vs.  Pro Medicus

Ecofibre

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ecofibre are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Ecofibre may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pro Medicus

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pro Medicus are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Pro Medicus unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ecofibre and Pro Medicus

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

The idea behind Ecofibre and Pro Medicus 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.