Correlation Between Insignia Financial and Medical Developments

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

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

Diversification Opportunities for Insignia Financial and Medical Developments

0.6

Correlation Coefficient

Insignia Financial  Medical Developments

Poor diversification

The 3 months correlation between Insignia and Medical is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Insignia Financial and Medical Developments Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Developments and Insignia Financial 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 Insignia Financial are associated (or correlated) with Medical Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Developments has no effect on the direction of Insignia Financial i.e., Insignia Financial and Medical Developments go up and down completely randomly.

Pair Corralation between Insignia Financial and Medical Developments

Assuming the 90 days trading horizon Insignia Financial is expected to generate 2.45 times less return on investment than Medical Developments. But when comparing it to its historical volatility, Insignia Financial is 2.97 times less risky than Medical Developments. It trades about 0.11 of its potential returns per unit of risk. Medical Developments International is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  41.00  in Medical Developments International on December 28, 2024 and sell it today you would earn a total of  15.00  from holding Medical Developments International or generate 36.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Insignia Financial  vs.  Medical Developments Internati

Insignia Financial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Insignia Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Insignia Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Medical Developments

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Developments International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Medical Developments unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Insignia Financial and Medical Developments

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

The idea behind Insignia Financial and Medical Developments International 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 CEOs Directory module to screen CEOs from public companies around the world.