Correlation Between Medipharm Labs and Stem Holdings

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

By analyzing existing cross correlation between Medipharm Labs Corp and Stem Holdings, you can compare the effects of market volatilities on Medipharm Labs and Stem Holdings 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 Medipharm Labs with a short position of Stem Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medipharm Labs and Stem Holdings.

Diversification Opportunities for Medipharm Labs and Stem Holdings

-0.15

Correlation Coefficient

Medipharm Labs  Stem Holdings

Good diversification

The 3 months correlation between Medipharm and Stem is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Medipharm Labs Corp and Stem Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stem Holdings and Medipharm Labs 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 Medipharm Labs Corp are associated (or correlated) with Stem Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stem Holdings has no effect on the direction of Medipharm Labs i.e., Medipharm Labs and Stem Holdings go up and down completely randomly.

Pair Corralation between Medipharm Labs and Stem Holdings

Assuming the 90 days horizon Medipharm Labs is expected to generate 17.55 times less return on investment than Stem Holdings. But when comparing it to its historical volatility, Medipharm Labs Corp is 22.26 times less risky than Stem Holdings. It trades about 0.16 of its potential returns per unit of risk. Stem Holdings is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Stem Holdings on December 29, 2024 and sell it today you would earn a total of  0.01  from holding Stem Holdings or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Medipharm Labs Corp  vs.  Stem Holdings

Medipharm Labs Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Medipharm Labs Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Medipharm Labs reported solid returns over the last few months and may actually be approaching a breakup point.

Stem Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stem Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile primary indicators, Stem Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Medipharm Labs and Stem Holdings

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

The idea behind Medipharm Labs Corp and Stem Holdings 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.