Correlation Between Medical Facilities and American Shared

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

By analyzing existing cross correlation between Medical Facilities and American Shared Hospital, you can compare the effects of market volatilities on Medical Facilities and American Shared 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 Medical Facilities with a short position of American Shared. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medical Facilities and American Shared.

Diversification Opportunities for Medical Facilities and American Shared

0.23

Correlation Coefficient

Medical Facilities  American Shared

Modest diversification

The 3 months correlation between Medical and American is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Medical Facilities and American Shared Hospital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Shared Hospital and Medical Facilities 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 Medical Facilities are associated (or correlated) with American Shared. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Shared Hospital has no effect on the direction of Medical Facilities i.e., Medical Facilities and American Shared go up and down completely randomly.

Pair Corralation between Medical Facilities and American Shared

Assuming the 90 days horizon Medical Facilities is expected to generate 0.83 times more return on investment than American Shared. However, Medical Facilities is 1.21 times less risky than American Shared. It trades about 0.11 of its potential returns per unit of risk. American Shared Hospital is currently generating about 0.04 per unit of risk. If you would invest  1,008  in Medical Facilities on August 31, 2024 and sell it today you would earn a total of  129.00  from holding Medical Facilities or generate 12.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

Medical Facilities  vs.  American Shared Hospital

Medical Facilities

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Facilities are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Medical Facilities reported solid returns over the last few months and may actually be approaching a breakup point.

American Shared Hospital

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Shared Hospital are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, American Shared is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Medical Facilities and American Shared

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

The idea behind Medical Facilities and American Shared Hospital 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.