Correlation Between Medical Developments and State Gas

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

Diversification Opportunities for Medical Developments and State Gas

-0.2

Correlation Coefficient

Medical Developments  State Gas

Good diversification

The 3 months correlation between Medical and State is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Medical Developments Internati and State Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Gas 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 State Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Gas has no effect on the direction of Medical Developments i.e., Medical Developments and State Gas go up and down completely randomly.

Pair Corralation between Medical Developments and State Gas

Assuming the 90 days trading horizon Medical Developments International is expected to under-perform the State Gas. But the stock apears to be less risky and, when comparing its historical volatility, Medical Developments International is 3.14 times less risky than State Gas. The stock trades about -0.06 of its potential returns per unit of risk. The State Gas is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4.50  in State Gas on September 14, 2024 and sell it today you would earn a total of  0.10  from holding State Gas or generate 2.22% return on investment over 90 days.

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

Medical Developments Internati  vs.  State Gas

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.

State Gas

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in State Gas are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, State Gas unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Medical Developments and State Gas

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

The idea behind Medical Developments International and State Gas 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.