Correlation Between Medical Developments and Pact Group

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

Diversification Opportunities for Medical Developments and Pact Group

0.57

Correlation Coefficient

Medical Developments  Pact Group

Very weak diversification

The 3 months correlation between Medical and Pact is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Medical Developments Internati and Pact Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pact Group 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 Pact Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pact Group Holdings has no effect on the direction of Medical Developments i.e., Medical Developments and Pact Group go up and down completely randomly.

Pair Corralation between Medical Developments and Pact Group

Assuming the 90 days trading horizon Medical Developments International is expected to generate 2.62 times more return on investment than Pact Group. However, Medical Developments is 2.62 times more volatile than Pact Group Holdings. It trades about 0.12 of its potential returns per unit of risk. Pact Group Holdings is currently generating about 0.2 per unit of risk. If you would invest  42.00  in Medical Developments International on December 4, 2024 and sell it today you would earn a total of  22.00  from holding Medical Developments International or generate 52.38% return on investment over 90 days.

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

Medical Developments Internati  vs.  Pact Group Holdings

Medical Developments

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Developments International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Medical Developments unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pact Group Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pact Group Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical indicators, Pact Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Medical Developments and Pact Group

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

The idea behind Medical Developments International and Pact Group 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.