Correlation Between PACCAR and Medicus Pharma

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

By analyzing existing cross correlation between PACCAR Inc and Medicus Pharma Ltd, you can compare the effects of market volatilities on PACCAR and Medicus Pharma 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 PACCAR with a short position of Medicus Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of PACCAR and Medicus Pharma.

Diversification Opportunities for PACCAR and Medicus Pharma

0.5

Correlation Coefficient

PACCAR  Medicus Pharma

Very weak diversification

The 3 months correlation between PACCAR and Medicus is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding PACCAR Inc and Medicus Pharma Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medicus Pharma and PACCAR 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 PACCAR Inc are associated (or correlated) with Medicus Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medicus Pharma has no effect on the direction of PACCAR i.e., PACCAR and Medicus Pharma go up and down completely randomly.

Pair Corralation between PACCAR and Medicus Pharma

Given the investment horizon of 90 days PACCAR Inc is expected to generate 0.17 times more return on investment than Medicus Pharma. However, PACCAR Inc is 5.97 times less risky than Medicus Pharma. It trades about 0.08 of its potential returns per unit of risk. Medicus Pharma Ltd is currently generating about -0.04 per unit of risk. If you would invest  10,268  in PACCAR Inc on October 25, 2024 and sell it today you would earn a total of  769.50  from holding PACCAR Inc or generate 7.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	85.0%
Values	Daily Returns

PACCAR Inc  vs.  Medicus Pharma Ltd

PACCAR Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PACCAR Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, PACCAR may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Medicus Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medicus Pharma Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with PACCAR and Medicus Pharma

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

The idea behind PACCAR Inc and Medicus Pharma Ltd 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.