Correlation Between Memphis Pharmaceuticals and Cleopatra Hospital

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

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

Diversification Opportunities for Memphis Pharmaceuticals and Cleopatra Hospital

0.8

Correlation Coefficient

Memphis Pharmaceuticals  Cleopatra Hospital

Very poor diversification

The 3 months correlation between Memphis and Cleopatra is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Memphis Pharmaceuticals and Cleopatra Hospital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cleopatra Hospital and Memphis Pharmaceuticals 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 Memphis Pharmaceuticals are associated (or correlated) with Cleopatra Hospital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cleopatra Hospital has no effect on the direction of Memphis Pharmaceuticals i.e., Memphis Pharmaceuticals and Cleopatra Hospital go up and down completely randomly.

Pair Corralation between Memphis Pharmaceuticals and Cleopatra Hospital

Assuming the 90 days trading horizon Memphis Pharmaceuticals is expected to generate 1.43 times less return on investment than Cleopatra Hospital. In addition to that, Memphis Pharmaceuticals is 2.15 times more volatile than Cleopatra Hospital. It trades about 0.03 of its total potential returns per unit of risk. Cleopatra Hospital is currently generating about 0.09 per unit of volatility. If you would invest  481.00  in Cleopatra Hospital on September 23, 2024 and sell it today you would earn a total of  306.00  from holding Cleopatra Hospital or generate 63.62% return on investment over 90 days.

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

Memphis Pharmaceuticals  vs.  Cleopatra Hospital

Memphis Pharmaceuticals

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Memphis Pharmaceuticals are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Memphis Pharmaceuticals reported solid returns over the last few months and may actually be approaching a breakup point.

Cleopatra Hospital

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cleopatra Hospital are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Cleopatra Hospital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Memphis Pharmaceuticals and Cleopatra Hospital

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

The idea behind Memphis Pharmaceuticals and Cleopatra Hospital 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.