Correlation Between M3 and EGF Theramed

Can any of the company-specific risk be diversified away by investing in both M3 and EGF Theramed 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 M3 and EGF Theramed into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between M3 Inc and EGF Theramed Health, you can compare the effects of market volatilities on M3 and EGF Theramed 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 M3 with a short position of EGF Theramed. Check out your portfolio center. Please also check ongoing floating volatility patterns of M3 and EGF Theramed.

Diversification Opportunities for M3 and EGF Theramed

-0.05

Correlation Coefficient

M3  EGF Theramed

Good diversification

The 3 months correlation between M3 and EGF is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding M3 Inc and EGF Theramed Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EGF Theramed Health and M3 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 M3 Inc are associated (or correlated) with EGF Theramed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EGF Theramed Health has no effect on the direction of M3 i.e., M3 and EGF Theramed go up and down completely randomly.

Pair Corralation between M3 and EGF Theramed

Assuming the 90 days horizon M3 Inc is expected to under-perform the EGF Theramed. But the pink sheet apears to be less risky and, when comparing its historical volatility, M3 Inc is 12.42 times less risky than EGF Theramed. The pink sheet trades about -0.09 of its potential returns per unit of risk. The EGF Theramed Health is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  27.00  in EGF Theramed Health on September 12, 2024 and sell it today you would lose (5.00) from holding EGF Theramed Health or give up 18.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	62.73%
Values	Daily Returns

M3 Inc  vs.  EGF Theramed Health

M3 Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in M3 Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, M3 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

EGF Theramed Health

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EGF Theramed Health are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical indicators, EGF Theramed reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with M3 and EGF Theramed

The main advantage of trading using opposite M3 and EGF Theramed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M3 position performs unexpectedly, EGF Theramed 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 EGF Theramed will offset losses from the drop in EGF Theramed's long position.

The idea behind M3 Inc and EGF Theramed Health 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.