Correlation Between Modular Medical and Orthofix Medical

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

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

Diversification Opportunities for Modular Medical and Orthofix Medical

-0.53

Correlation Coefficient

Modular Medical  Orthofix Medical

Excellent diversification

The 3 months correlation between Modular and Orthofix is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Modular Medical and Orthofix Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orthofix Medical 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 Orthofix Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orthofix Medical has no effect on the direction of Modular Medical i.e., Modular Medical and Orthofix Medical go up and down completely randomly.

Pair Corralation between Modular Medical and Orthofix Medical

Given the investment horizon of 90 days Modular Medical is expected to under-perform the Orthofix Medical. In addition to that, Modular Medical is 1.55 times more volatile than Orthofix Medical. It trades about -0.02 of its total potential returns per unit of risk. Orthofix Medical is currently generating about 0.11 per unit of volatility. If you would invest  1,673  in Orthofix Medical on September 2, 2024 and sell it today you would earn a total of  280.00  from holding Orthofix Medical or generate 16.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Modular Medical  vs.  Orthofix Medical

Modular Medical

Risk-Adjusted Performance

0 of 100

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 rather sound fundamental indicators, Modular Medical is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Orthofix Medical

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Orthofix Medical are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady forward indicators, Orthofix Medical showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Modular Medical and Orthofix Medical

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

The idea behind Modular Medical and Orthofix Medical 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.