Correlation Between Medibank Private and Ampol

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

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

Diversification Opportunities for Medibank Private and Ampol

-0.31

Correlation Coefficient

Medibank Private  Ampol

Very good diversification

The 3 months correlation between Medibank and Ampol is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Medibank Private and Ampol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ampol and Medibank Private 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 Medibank Private are associated (or correlated) with Ampol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ampol has no effect on the direction of Medibank Private i.e., Medibank Private and Ampol go up and down completely randomly.

Pair Corralation between Medibank Private and Ampol

Assuming the 90 days trading horizon Medibank Private is expected to under-perform the Ampol. But the stock apears to be less risky and, when comparing its historical volatility, Medibank Private is 1.61 times less risky than Ampol. The stock trades about -0.1 of its potential returns per unit of risk. The Ampol is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,803  in Ampol on October 8, 2024 and sell it today you would earn a total of  118.00  from holding Ampol or generate 4.21% return on investment over 90 days.

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

Medibank Private  vs.  Ampol

Medibank Private

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Medibank Private are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Medibank Private is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Ampol

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ampol has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Ampol is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Medibank Private and Ampol

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

The idea behind Medibank Private and Ampol 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.