Correlation Between Modular Medical and Lifeline Biotechnologies

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

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

Diversification Opportunities for Modular Medical and Lifeline Biotechnologies

0.11

Correlation Coefficient

Modular Medical  Lifeline Biotechnologies

Average diversification

The 3 months correlation between Modular and Lifeline is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Modular Medical and Lifeline Biotechnologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeline Biotechnologies and Modular Medical 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 Modular Medical are associated (or correlated) with Lifeline Biotechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifeline Biotechnologies has no effect on the direction of Modular Medical i.e., Modular Medical and Lifeline Biotechnologies go up and down completely randomly.

Pair Corralation between Modular Medical and Lifeline Biotechnologies

Given the investment horizon of 90 days Modular Medical is expected to under-perform the Lifeline Biotechnologies. But the stock apears to be less risky and, when comparing its historical volatility, Modular Medical is 14.07 times less risky than Lifeline Biotechnologies. The stock trades about -0.14 of its potential returns per unit of risk. The Lifeline Biotechnologies is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Lifeline Biotechnologies on December 20, 2024 and sell it today you would earn a total of  0.02  from holding Lifeline Biotechnologies or generate 200.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Modular Medical  vs.  Lifeline Biotechnologies

Modular Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Modular Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Lifeline Biotechnologies

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lifeline Biotechnologies are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental drivers, Lifeline Biotechnologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Modular Medical and Lifeline Biotechnologies

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

The idea behind Modular Medical and Lifeline Biotechnologies 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 Commodity Directory module to find actively traded commodities issued by global exchanges.