Correlation Between Medibank Private and Brainchip Holdings

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

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

Diversification Opportunities for Medibank Private and Brainchip Holdings

-0.77

Correlation Coefficient

Medibank Private  Brainchip Holdings

Pay attention - limited upside

The 3 months correlation between Medibank and Brainchip is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Medibank Private and Brainchip Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brainchip Holdings 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 Brainchip Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brainchip Holdings has no effect on the direction of Medibank Private i.e., Medibank Private and Brainchip Holdings go up and down completely randomly.

Pair Corralation between Medibank Private and Brainchip Holdings

Assuming the 90 days trading horizon Medibank Private is expected to generate 0.22 times more return on investment than Brainchip Holdings. However, Medibank Private is 4.47 times less risky than Brainchip Holdings. It trades about 0.18 of its potential returns per unit of risk. Brainchip Holdings is currently generating about -0.04 per unit of risk. If you would invest  374.00  in Medibank Private on December 23, 2024 and sell it today you would earn a total of  63.00  from holding Medibank Private or generate 16.84% return on investment over 90 days.

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

Medibank Private  vs.  Brainchip Holdings

Medibank Private

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Medibank Private are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Medibank Private unveiled solid returns over the last few months and may actually be approaching a breakup point.

Brainchip Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brainchip Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Medibank Private and Brainchip Holdings

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

The idea behind Medibank Private and Brainchip Holdings 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.