Correlation Between MediciNova and Decision Diagnostics

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

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

Diversification Opportunities for MediciNova and Decision Diagnostics

0.0

Correlation Coefficient

MediciNova  Decision Diagnostics

Pay attention - limited upside

The 3 months correlation between MediciNova and Decision is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding MediciNova and Decision Diagnostics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Decision 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 Decision Diagnostics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Decision Diagnostics has no effect on the direction of MediciNova i.e., MediciNova and Decision Diagnostics go up and down completely randomly.

Pair Corralation between MediciNova and Decision Diagnostics

If you would invest  177.00  in MediciNova on September 4, 2024 and sell it today you would earn a total of  61.00  from holding MediciNova or generate 34.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

MediciNova  vs.  Decision Diagnostics

MediciNova

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MediciNova are ranked lower than 7 (%) 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.

Decision Diagnostics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Decision Diagnostics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Decision Diagnostics is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with MediciNova and Decision Diagnostics

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

The idea behind MediciNova and Decision Diagnostics 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.