Correlation Between Med Life and Germina Agribusiness

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

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

Diversification Opportunities for Med Life and Germina Agribusiness

-0.03

Correlation Coefficient

Med Life  Germina Agribusiness

Good diversification

The 3 months correlation between Med and Germina is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Med Life SA and Germina Agribusiness SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Germina Agribusiness and Med Life 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 Med Life SA are associated (or correlated) with Germina Agribusiness. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Germina Agribusiness has no effect on the direction of Med Life i.e., Med Life and Germina Agribusiness go up and down completely randomly.

Pair Corralation between Med Life and Germina Agribusiness

Given the investment horizon of 90 days Med Life is expected to generate 2.28 times less return on investment than Germina Agribusiness. But when comparing it to its historical volatility, Med Life SA is 2.36 times less risky than Germina Agribusiness. It trades about 0.04 of its potential returns per unit of risk. Germina Agribusiness SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  163.00  in Germina Agribusiness SA on December 21, 2024 and sell it today you would earn a total of  6.00  from holding Germina Agribusiness SA or generate 3.68% return on investment over 90 days.

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

Med Life SA  vs.  Germina Agribusiness SA

Med Life SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Med Life SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Med Life is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Germina Agribusiness

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Germina Agribusiness SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Germina Agribusiness may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Med Life and Germina Agribusiness

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

The idea behind Med Life SA and Germina Agribusiness SA 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.