Correlation Between MediciNova and Medical Facilities

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

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

Diversification Opportunities for MediciNova and Medical Facilities

0.06

Correlation Coefficient

MediciNova  Medical Facilities

Significant diversification

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

Pair Corralation between MediciNova and Medical Facilities

Given the investment horizon of 90 days MediciNova is expected to generate 4.15 times more return on investment than Medical Facilities. However, MediciNova is 4.15 times more volatile than Medical Facilities. It trades about 0.08 of its potential returns per unit of risk. Medical Facilities is currently generating about 0.09 per unit of risk. If you would invest  165.00  in MediciNova on September 3, 2024 and sell it today you would earn a total of  42.00  from holding MediciNova or generate 25.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

MediciNova  vs.  Medical Facilities

MediciNova

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MediciNova are ranked lower than 6 (%) 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.

Medical Facilities

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Facilities are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Medical Facilities may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with MediciNova and Medical Facilities

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

The idea behind MediciNova and Medical Facilities 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..