Correlation Between Medical Developments and Ecofibre

Can any of the company-specific risk be diversified away by investing in both Medical Developments 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 Medical Developments and Ecofibre 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 Ecofibre, you can compare the effects of market volatilities on Medical Developments 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 Medical Developments with a short position of Ecofibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medical Developments and Ecofibre.

Diversification Opportunities for Medical Developments and Ecofibre

0.22

Correlation Coefficient

Medical Developments  Ecofibre

Modest diversification

The 3 months correlation between Medical and Ecofibre is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Medical Developments Internati and Ecofibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecofibre 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 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 Medical Developments i.e., Medical Developments and Ecofibre go up and down completely randomly.

Pair Corralation between Medical Developments and Ecofibre

Assuming the 90 days trading horizon Medical Developments International is expected to under-perform the Ecofibre. But the stock apears to be less risky and, when comparing its historical volatility, Medical Developments International is 2.86 times less risky than Ecofibre. The stock trades about -0.05 of its potential returns per unit of risk. The Ecofibre is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2.70  in Ecofibre on September 3, 2024 and sell it today you would earn a total of  1.10  from holding Ecofibre or generate 40.74% return on investment over 90 days.

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

Medical Developments Internati  vs.  Ecofibre

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Ecofibre

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ecofibre are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Ecofibre unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Medical Developments and Ecofibre

The main advantage of trading using opposite Medical Developments and Ecofibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medical Developments 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 Medical Developments International 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .