Correlation Between Equity LifeStyle and MeVis Medical

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

By analyzing existing cross correlation between Equity LifeStyle Properties and MeVis Medical Solutions, you can compare the effects of market volatilities on Equity LifeStyle and MeVis Medical 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 Equity LifeStyle with a short position of MeVis Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity LifeStyle and MeVis Medical.

Diversification Opportunities for Equity LifeStyle and MeVis Medical

0.36

Correlation Coefficient

Equity LifeStyle  MeVis Medical

Weak diversification

The 3 months correlation between Equity and MeVis is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Equity LifeStyle Properties and MeVis Medical Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MeVis Medical Solutions and Equity LifeStyle 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 Equity LifeStyle Properties are associated (or correlated) with MeVis Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MeVis Medical Solutions has no effect on the direction of Equity LifeStyle i.e., Equity LifeStyle and MeVis Medical go up and down completely randomly.

Pair Corralation between Equity LifeStyle and MeVis Medical

Assuming the 90 days horizon Equity LifeStyle is expected to generate 46.98 times less return on investment than MeVis Medical. But when comparing it to its historical volatility, Equity LifeStyle Properties is 1.16 times less risky than MeVis Medical. It trades about 0.01 of its potential returns per unit of risk. MeVis Medical Solutions is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,400  in MeVis Medical Solutions on October 8, 2024 and sell it today you would earn a total of  100.00  from holding MeVis Medical Solutions or generate 4.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Equity LifeStyle Properties  vs.  MeVis Medical Solutions

Equity LifeStyle Pro

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Equity LifeStyle Properties are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Equity LifeStyle may actually be approaching a critical reversion point that can send shares even higher in February 2025.

MeVis Medical Solutions

Risk-Adjusted Performance

9 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MeVis Medical Solutions are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, MeVis Medical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Equity LifeStyle and MeVis Medical

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

The idea behind Equity LifeStyle Properties and MeVis Medical Solutions 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.