Correlation Between Medical Developments and Emeco Holdings

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

By analyzing existing cross correlation between Medical Developments International and Emeco Holdings, you can compare the effects of market volatilities on Medical Developments and Emeco 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 Medical Developments with a short position of Emeco Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medical Developments and Emeco Holdings.

Diversification Opportunities for Medical Developments and Emeco Holdings

-0.81

Correlation Coefficient

Medical Developments  Emeco Holdings

Pay attention - limited upside

The 3 months correlation between Medical and Emeco is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Medical Developments Internati and Emeco Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emeco Holdings and Medical Developments 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 Medical Developments International are associated (or correlated) with Emeco Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emeco Holdings has no effect on the direction of Medical Developments i.e., Medical Developments and Emeco Holdings go up and down completely randomly.

Pair Corralation between Medical Developments and Emeco Holdings

Assuming the 90 days trading horizon Medical Developments International is expected to under-perform the Emeco Holdings. In addition to that, Medical Developments is 1.11 times more volatile than Emeco Holdings. It trades about -0.04 of its total potential returns per unit of risk. Emeco Holdings is currently generating about 0.1 per unit of volatility. If you would invest  80.00  in Emeco Holdings on October 10, 2024 and sell it today you would earn a total of  9.00  from holding Emeco Holdings or generate 11.25% return on investment over 90 days.

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

Medical Developments Internati  vs.  Emeco Holdings

Medical Developments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medical Developments International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Medical Developments is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Emeco Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emeco Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Emeco Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Medical Developments and Emeco Holdings

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

The idea behind Medical Developments International and Emeco 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.