Correlation Between Medicofarma Biotech and KCI SA

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

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

Diversification Opportunities for Medicofarma Biotech and KCI SA

-0.63

Correlation Coefficient

Medicofarma Biotech  KCI SA

Excellent diversification

The 3 months correlation between Medicofarma and KCI is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Medicofarma Biotech SA and KCI SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KCI SA and Medicofarma Biotech 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 Medicofarma Biotech SA are associated (or correlated) with KCI SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KCI SA has no effect on the direction of Medicofarma Biotech i.e., Medicofarma Biotech and KCI SA go up and down completely randomly.

Pair Corralation between Medicofarma Biotech and KCI SA

Assuming the 90 days trading horizon Medicofarma Biotech SA is expected to under-perform the KCI SA. In addition to that, Medicofarma Biotech is 1.83 times more volatile than KCI SA. It trades about -0.11 of its total potential returns per unit of risk. KCI SA is currently generating about 0.08 per unit of volatility. If you would invest  83.00  in KCI SA on December 30, 2024 and sell it today you would earn a total of  11.00  from holding KCI SA or generate 13.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Medicofarma Biotech SA  vs.  KCI SA

Medicofarma Biotech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Medicofarma Biotech SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

KCI SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KCI SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, KCI SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Medicofarma Biotech and KCI SA

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

The idea behind Medicofarma Biotech SA and KCI 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.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.