Correlation Between Medical Developments and Whitehaven Coal

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

Diversification Opportunities for Medical Developments and Whitehaven Coal

0.64

Correlation Coefficient

Medical Developments  Whitehaven Coal

Poor diversification

The 3 months correlation between Medical and Whitehaven is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Medical Developments Internati and Whitehaven Coal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitehaven Coal 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 Whitehaven Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitehaven Coal has no effect on the direction of Medical Developments i.e., Medical Developments and Whitehaven Coal go up and down completely randomly.

Pair Corralation between Medical Developments and Whitehaven Coal

Assuming the 90 days trading horizon Medical Developments is expected to generate 10.26 times less return on investment than Whitehaven Coal. In addition to that, Medical Developments is 1.25 times more volatile than Whitehaven Coal. It trades about 0.01 of its total potential returns per unit of risk. Whitehaven Coal is currently generating about 0.16 per unit of volatility. If you would invest  600.00  in Whitehaven Coal on October 26, 2024 and sell it today you would earn a total of  37.00  from holding Whitehaven Coal or generate 6.17% return on investment over 90 days.

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

Medical Developments Internati  vs.  Whitehaven Coal

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Whitehaven Coal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Whitehaven Coal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Medical Developments and Whitehaven Coal

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

The idea behind Medical Developments International and Whitehaven Coal 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.