Correlation Between Med Life and TRANSILVANIA INVESTMENTS

Can any of the company-specific risk be diversified away by investing in both Med Life and TRANSILVANIA INVESTMENTS 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 TRANSILVANIA INVESTMENTS 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 TRANSILVANIA INVESTMENTS ALLIANCE, you can compare the effects of market volatilities on Med Life and TRANSILVANIA INVESTMENTS 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 TRANSILVANIA INVESTMENTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Med Life and TRANSILVANIA INVESTMENTS.

Diversification Opportunities for Med Life and TRANSILVANIA INVESTMENTS

0.33

Correlation Coefficient

Med Life  TRANSILVANIA INVESTMENTS

Weak diversification

The 3 months correlation between Med and TRANSILVANIA is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Med Life SA and TRANSILVANIA INVESTMENTS ALLIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRANSILVANIA INVESTMENTS 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 TRANSILVANIA INVESTMENTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRANSILVANIA INVESTMENTS has no effect on the direction of Med Life i.e., Med Life and TRANSILVANIA INVESTMENTS go up and down completely randomly.

Pair Corralation between Med Life and TRANSILVANIA INVESTMENTS

Given the investment horizon of 90 days Med Life SA is expected to under-perform the TRANSILVANIA INVESTMENTS. In addition to that, Med Life is 2.16 times more volatile than TRANSILVANIA INVESTMENTS ALLIANCE. It trades about -0.02 of its total potential returns per unit of risk. TRANSILVANIA INVESTMENTS ALLIANCE is currently generating about 0.05 per unit of volatility. If you would invest  27.00  in TRANSILVANIA INVESTMENTS ALLIANCE on October 9, 2024 and sell it today you would earn a total of  10.00  from holding TRANSILVANIA INVESTMENTS ALLIANCE or generate 37.04% return on investment over 90 days.

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

Med Life SA  vs.  TRANSILVANIA INVESTMENTS ALLIA

Med Life SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Med Life SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Med Life is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

TRANSILVANIA INVESTMENTS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TRANSILVANIA INVESTMENTS ALLIANCE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, TRANSILVANIA INVESTMENTS is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Med Life and TRANSILVANIA INVESTMENTS

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

The idea behind Med Life SA and TRANSILVANIA INVESTMENTS ALLIANCE 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.