Correlation Between Medicalg and M Food

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

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

Diversification Opportunities for Medicalg and M Food

0.38

Correlation Coefficient

Medicalg  M Food

Weak diversification

The 3 months correlation between Medicalg and MFD is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Medicalg and M Food SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M Food SA and Medicalg 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 Medicalg are associated (or correlated) with M Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M Food SA has no effect on the direction of Medicalg i.e., Medicalg and M Food go up and down completely randomly.

Pair Corralation between Medicalg and M Food

Assuming the 90 days trading horizon Medicalg is expected to generate 1.01 times less return on investment than M Food. But when comparing it to its historical volatility, Medicalg is 1.68 times less risky than M Food. It trades about 0.22 of its potential returns per unit of risk. M Food SA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  83.00  in M Food SA on December 21, 2024 and sell it today you would earn a total of  36.00  from holding M Food SA or generate 43.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	91.53%
Values	Daily Returns

Medicalg  vs.  M Food SA

Medicalg

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Medicalg are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Medicalg reported solid returns over the last few months and may actually be approaching a breakup point.

M Food SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in M Food SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, M Food reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Medicalg and M Food

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

The idea behind Medicalg and M Food 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.