Correlation Between Medibank Private and Galan Lithium
Can any of the company-specific risk be diversified away by investing in both Medibank Private and Galan Lithium 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 Galan Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Medibank Private and Galan Lithium, you can compare the effects of market volatilities on Medibank Private and Galan Lithium 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 Galan Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medibank Private and Galan Lithium.
Diversification Opportunities for Medibank Private and Galan Lithium
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Medibank and Galan is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Medibank Private and Galan Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galan Lithium 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 Galan Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galan Lithium has no effect on the direction of Medibank Private i.e., Medibank Private and Galan Lithium go up and down completely randomly.
Pair Corralation between Medibank Private and Galan Lithium
Assuming the 90 days trading horizon Medibank Private is expected to under-perform the Galan Lithium. But the stock apears to be less risky and, when comparing its historical volatility, Medibank Private is 9.67 times less risky than Galan Lithium. The stock trades about -0.09 of its potential returns per unit of risk. The Galan Lithium is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 12.00 in Galan Lithium on October 10, 2024 and sell it today you would earn a total of 2.00 from holding Galan Lithium or generate 16.67% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 95.0% |
Values | Daily Returns |
Medibank Private vs. Galan Lithium
Performance |
Timeline |
Medibank Private |
Galan Lithium |
Medibank Private and Galan Lithium Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Medibank Private and Galan Lithium
The main advantage of trading using opposite Medibank Private and Galan Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medibank Private position performs unexpectedly, Galan Lithium 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 Galan Lithium will offset losses from the drop in Galan Lithium's long position.Medibank Private vs. Ambertech | Medibank Private vs. Everest Metals | Medibank Private vs. Centrex Metals | Medibank Private vs. Thorney Technologies |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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