Correlation Between Medibank Private and Ecofibre

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

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

Diversification Opportunities for Medibank Private and Ecofibre

-0.63

Correlation Coefficient

Medibank Private  Ecofibre

Excellent diversification

The 3 months correlation between Medibank and Ecofibre is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Medibank Private and Ecofibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecofibre 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 Ecofibre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecofibre has no effect on the direction of Medibank Private i.e., Medibank Private and Ecofibre go up and down completely randomly.

Pair Corralation between Medibank Private and Ecofibre

Assuming the 90 days trading horizon Medibank Private is expected to generate 0.28 times more return on investment than Ecofibre. However, Medibank Private is 3.61 times less risky than Ecofibre. It trades about 0.2 of its potential returns per unit of risk. Ecofibre is currently generating about -0.03 per unit of risk. If you would invest  376.00  in Medibank Private on December 30, 2024 and sell it today you would earn a total of  75.00  from holding Medibank Private or generate 19.95% 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.  Ecofibre

Medibank Private

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Medibank Private are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Medibank Private unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ecofibre

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ecofibre has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Medibank Private and Ecofibre

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

The idea behind Medibank Private and Ecofibre 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.