Correlation Between Mid Atlantic and Quotient

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

By analyzing existing cross correlation between Mid Atlantic Home Health and Quotient Limited, you can compare the effects of market volatilities on Mid Atlantic and Quotient 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 Mid Atlantic with a short position of Quotient. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Atlantic and Quotient.

Diversification Opportunities for Mid Atlantic and Quotient

0.0

Correlation Coefficient

Mid Atlantic  Quotient

Pay attention - limited upside

The 3 months correlation between Mid and Quotient is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Mid Atlantic Home Health and Quotient Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quotient Limited and Mid Atlantic 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 Mid Atlantic Home Health are associated (or correlated) with Quotient. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quotient Limited has no effect on the direction of Mid Atlantic i.e., Mid Atlantic and Quotient go up and down completely randomly.

Pair Corralation between Mid Atlantic and Quotient

Given the investment horizon of 90 days Mid Atlantic Home Health is expected to under-perform the Quotient. But the pink sheet apears to be less risky and, when comparing its historical volatility, Mid Atlantic Home Health is 12.29 times less risky than Quotient. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Quotient Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  9.00  in Quotient Limited on October 11, 2024 and sell it today you would lose (5.00) from holding Quotient Limited or give up 55.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	20.4%
Values	Daily Returns

Mid Atlantic Home Health  vs.  Quotient Limited

Mid Atlantic Home

Risk-Adjusted Performance

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Very Weak

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

Quotient Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quotient Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Quotient is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Mid Atlantic and Quotient

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

The idea behind Mid Atlantic Home Health and Quotient Limited 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.