Correlation Between Medibank Private and COG Financial

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

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

Diversification Opportunities for Medibank Private and COG Financial

-0.52

Correlation Coefficient

Medibank Private  COG Financial

Excellent diversification

The 3 months correlation between Medibank and COG is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Medibank Private and COG Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COG Financial Services 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 COG Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COG Financial Services has no effect on the direction of Medibank Private i.e., Medibank Private and COG Financial go up and down completely randomly.

Pair Corralation between Medibank Private and COG Financial

Assuming the 90 days trading horizon Medibank Private is expected to generate 0.46 times more return on investment than COG Financial. However, Medibank Private is 2.15 times less risky than COG Financial. It trades about 0.16 of its potential returns per unit of risk. COG Financial Services is currently generating about 0.05 per unit of risk. If you would invest  360.00  in Medibank Private on October 6, 2024 and sell it today you would earn a total of  22.00  from holding Medibank Private or generate 6.11% return on investment over 90 days.

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

Medibank Private  vs.  COG Financial Services

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

COG Financial Services

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in COG Financial Services are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, COG Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Medibank Private and COG Financial

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

The idea behind Medibank Private and COG Financial Services 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.