Correlation Between MediciNova and Medpace Holdings

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

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

Diversification Opportunities for MediciNova and Medpace Holdings

0.06

Correlation Coefficient

MediciNova  Medpace Holdings

Significant diversification

The 3 months correlation between MediciNova and Medpace is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding MediciNova and Medpace Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medpace Holdings 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 Medpace Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medpace Holdings has no effect on the direction of MediciNova i.e., MediciNova and Medpace Holdings go up and down completely randomly.

Pair Corralation between MediciNova and Medpace Holdings

Given the investment horizon of 90 days MediciNova is expected to generate 2.1 times more return on investment than Medpace Holdings. However, MediciNova is 2.1 times more volatile than Medpace Holdings. It trades about 0.08 of its potential returns per unit of risk. Medpace Holdings is currently generating about -0.04 per unit of risk. If you would invest  139.00  in MediciNova on September 21, 2024 and sell it today you would earn a total of  77.00  from holding MediciNova or generate 55.4% return on investment over 90 days.

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

MediciNova  vs.  Medpace Holdings

MediciNova

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MediciNova are ranked lower than 4 (%) 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.

Medpace Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medpace Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Medpace Holdings is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with MediciNova and Medpace Holdings

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

The idea behind MediciNova and Medpace 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.