Correlation Between Fresenius and Garofalo Health

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

By analyzing existing cross correlation between Fresenius SE Co and Garofalo Health Care, you can compare the effects of market volatilities on Fresenius and Garofalo Health 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 Fresenius with a short position of Garofalo Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fresenius and Garofalo Health.

Diversification Opportunities for Fresenius and Garofalo Health

-0.33

Correlation Coefficient

Fresenius  Garofalo Health

Very good diversification

The 3 months correlation between Fresenius and Garofalo is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Fresenius SE Co and Garofalo Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garofalo Health Care and Fresenius 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 Fresenius SE Co are associated (or correlated) with Garofalo Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garofalo Health Care has no effect on the direction of Fresenius i.e., Fresenius and Garofalo Health go up and down completely randomly.

Pair Corralation between Fresenius and Garofalo Health

Assuming the 90 days trading horizon Fresenius SE Co is expected to generate 0.83 times more return on investment than Garofalo Health. However, Fresenius SE Co is 1.21 times less risky than Garofalo Health. It trades about -0.02 of its potential returns per unit of risk. Garofalo Health Care is currently generating about -0.05 per unit of risk. If you would invest  3,382  in Fresenius SE Co on October 6, 2024 and sell it today you would lose (33.00) from holding Fresenius SE Co or give up 0.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.5%
Values	Daily Returns

Fresenius SE Co  vs.  Garofalo Health Care

Fresenius SE

Risk-Adjusted Performance

0 of 100

Very Weak

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

Garofalo Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Garofalo Health Care has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Garofalo Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Fresenius and Garofalo Health

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

The idea behind Fresenius SE Co and Garofalo Health Care 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.