Correlation Between Lantern Pharma and MDxHealth

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

By analyzing existing cross correlation between Lantern Pharma and MDxHealth SA ADR, you can compare the effects of market volatilities on Lantern Pharma and MDxHealth 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 Lantern Pharma with a short position of MDxHealth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lantern Pharma and MDxHealth.

Diversification Opportunities for Lantern Pharma and MDxHealth

-0.34

Correlation Coefficient

Lantern Pharma  MDxHealth

Very good diversification

The 3 months correlation between Lantern and MDxHealth is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Lantern Pharma and MDxHealth SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MDxHealth SA ADR and Lantern Pharma 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 Lantern Pharma are associated (or correlated) with MDxHealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MDxHealth SA ADR has no effect on the direction of Lantern Pharma i.e., Lantern Pharma and MDxHealth go up and down completely randomly.

Pair Corralation between Lantern Pharma and MDxHealth

Given the investment horizon of 90 days Lantern Pharma is expected to generate 2.25 times more return on investment than MDxHealth. However, Lantern Pharma is 2.25 times more volatile than MDxHealth SA ADR. It trades about 0.09 of its potential returns per unit of risk. MDxHealth SA ADR is currently generating about -0.03 per unit of risk. If you would invest  321.00  in Lantern Pharma on November 29, 2024 and sell it today you would earn a total of  84.00  from holding Lantern Pharma or generate 26.17% return on investment over 90 days.

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

Lantern Pharma  vs.  MDxHealth SA ADR

Lantern Pharma

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lantern Pharma are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Lantern Pharma displayed solid returns over the last few months and may actually be approaching a breakup point.

MDxHealth SA ADR

Risk-Adjusted Performance

Weak

Over the last 90 days MDxHealth SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, MDxHealth is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Lantern Pharma and MDxHealth

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

The idea behind Lantern Pharma and MDxHealth SA ADR 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.