Correlation Between Episurf Medical and Mekonomen

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

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

Diversification Opportunities for Episurf Medical and Mekonomen

-0.38

Correlation Coefficient

Episurf Medical  Mekonomen

Very good diversification

The 3 months correlation between Episurf and Mekonomen is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Episurf Medical AB and Mekonomen AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mekonomen AB and Episurf Medical 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 Episurf Medical AB are associated (or correlated) with Mekonomen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mekonomen AB has no effect on the direction of Episurf Medical i.e., Episurf Medical and Mekonomen go up and down completely randomly.

Pair Corralation between Episurf Medical and Mekonomen

Assuming the 90 days trading horizon Episurf Medical AB is expected to generate 4.38 times more return on investment than Mekonomen. However, Episurf Medical is 4.38 times more volatile than Mekonomen AB. It trades about 0.03 of its potential returns per unit of risk. Mekonomen AB is currently generating about -0.07 per unit of risk. If you would invest  14.00  in Episurf Medical AB on October 5, 2024 and sell it today you would earn a total of  0.00  from holding Episurf Medical AB or generate 0.0% return on investment over 90 days.

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

Episurf Medical AB  vs.  Mekonomen AB

Episurf Medical AB

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Episurf Medical AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat uncertain forward indicators, Episurf Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Mekonomen AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mekonomen AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Mekonomen is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Episurf Medical and Mekonomen

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

The idea behind Episurf Medical AB and Mekonomen AB 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.