Correlation Between MediciNova and Cardio Diagnostics

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

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

Diversification Opportunities for MediciNova and Cardio Diagnostics

0.5

Correlation Coefficient

MediciNova  Cardio Diagnostics

Very weak diversification

The 3 months correlation between MediciNova and Cardio is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding MediciNova and Cardio Diagnostics Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardio Diagnostics and MediciNova 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 MediciNova are associated (or correlated) with Cardio Diagnostics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardio Diagnostics has no effect on the direction of MediciNova i.e., MediciNova and Cardio Diagnostics go up and down completely randomly.

Pair Corralation between MediciNova and Cardio Diagnostics

Given the investment horizon of 90 days MediciNova is expected to generate 11.02 times less return on investment than Cardio Diagnostics. But when comparing it to its historical volatility, MediciNova is 2.86 times less risky than Cardio Diagnostics. It trades about 0.05 of its potential returns per unit of risk. Cardio Diagnostics Holdings is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  3.39  in Cardio Diagnostics Holdings on October 6, 2024 and sell it today you would earn a total of  5.57  from holding Cardio Diagnostics Holdings or generate 164.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.16%
Values	Daily Returns

MediciNova  vs.  Cardio Diagnostics Holdings

MediciNova

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MediciNova are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, MediciNova showed solid returns over the last few months and may actually be approaching a breakup point.

Cardio Diagnostics

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cardio Diagnostics Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Cardio Diagnostics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MediciNova and Cardio Diagnostics

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

The idea behind MediciNova and Cardio Diagnostics 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.