Correlation Between HORNBACH Baumarkt and MEDIPAL HOLDINGS

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

By analyzing existing cross correlation between HORNBACH Baumarkt AG and MEDIPAL HOLDINGS P, you can compare the effects of market volatilities on HORNBACH Baumarkt and MEDIPAL 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 HORNBACH Baumarkt with a short position of MEDIPAL HOLDINGS. Check out your portfolio center. Please also check ongoing floating volatility patterns of HORNBACH Baumarkt and MEDIPAL HOLDINGS.

Diversification Opportunities for HORNBACH Baumarkt and MEDIPAL HOLDINGS

-0.79

Correlation Coefficient

HORNBACH Baumarkt  MEDIPAL HOLDINGS

Pay attention - limited upside

The 3 months correlation between HORNBACH and MEDIPAL is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding HORNBACH Baumarkt AG and MEDIPAL HOLDINGS P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEDIPAL HOLDINGS P and HORNBACH Baumarkt 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 HORNBACH Baumarkt AG are associated (or correlated) with MEDIPAL HOLDINGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEDIPAL HOLDINGS P has no effect on the direction of HORNBACH Baumarkt i.e., HORNBACH Baumarkt and MEDIPAL HOLDINGS go up and down completely randomly.

Pair Corralation between HORNBACH Baumarkt and MEDIPAL HOLDINGS

Assuming the 90 days trading horizon HORNBACH Baumarkt AG is expected to generate 1.22 times more return on investment than MEDIPAL HOLDINGS. However, HORNBACH Baumarkt is 1.22 times more volatile than MEDIPAL HOLDINGS P. It trades about 0.01 of its potential returns per unit of risk. MEDIPAL HOLDINGS P is currently generating about -0.07 per unit of risk. If you would invest  6,200  in HORNBACH Baumarkt AG on October 11, 2024 and sell it today you would earn a total of  0.00  from holding HORNBACH Baumarkt AG or generate 0.0% return on investment over 90 days.

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

HORNBACH Baumarkt AG  vs.  MEDIPAL HOLDINGS P

HORNBACH Baumarkt

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HORNBACH Baumarkt AG are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain primary indicators, HORNBACH Baumarkt displayed solid returns over the last few months and may actually be approaching a breakup point.

MEDIPAL HOLDINGS P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MEDIPAL HOLDINGS P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with HORNBACH Baumarkt and MEDIPAL HOLDINGS

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

The idea behind HORNBACH Baumarkt AG and MEDIPAL HOLDINGS P 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.