Correlation Between INC Research and Medipharm Labs

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

By analyzing existing cross correlation between INC Research Holdings and Medipharm Labs Corp, you can compare the effects of market volatilities on INC Research and Medipharm Labs 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 INC Research with a short position of Medipharm Labs. Check out your portfolio center. Please also check ongoing floating volatility patterns of INC Research and Medipharm Labs.

Diversification Opportunities for INC Research and Medipharm Labs

-0.75

Correlation Coefficient

INC Research  Medipharm Labs

Pay attention - limited upside

The 3 months correlation between INC and Medipharm is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding INC Research Holdings and Medipharm Labs Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medipharm Labs Corp and INC Research 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 INC Research Holdings are associated (or correlated) with Medipharm Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medipharm Labs Corp has no effect on the direction of INC Research i.e., INC Research and Medipharm Labs go up and down completely randomly.

Pair Corralation between INC Research and Medipharm Labs

Given the investment horizon of 90 days INC Research Holdings is expected to under-perform the Medipharm Labs. But the stock apears to be less risky and, when comparing its historical volatility, INC Research Holdings is 2.55 times less risky than Medipharm Labs. The stock trades about -0.07 of its potential returns per unit of risk. The Medipharm Labs Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  4.44  in Medipharm Labs Corp on December 29, 2024 and sell it today you would earn a total of  2.56  from holding Medipharm Labs Corp or generate 57.66% return on investment over 90 days.

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

INC Research Holdings  vs.  Medipharm Labs Corp

INC Research Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days INC Research Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Medipharm Labs Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Medipharm Labs Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Medipharm Labs reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INC Research and Medipharm Labs

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

The idea behind INC Research Holdings and Medipharm Labs Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.