Correlation Between Pacific Health and Medicure

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

By analyzing existing cross correlation between Pacific Health Care and Medicure, you can compare the effects of market volatilities on Pacific Health and Medicure 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 Pacific Health with a short position of Medicure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacific Health and Medicure.

Diversification Opportunities for Pacific Health and Medicure

0.08

Correlation Coefficient

Pacific Health  Medicure

Significant diversification

The 3 months correlation between Pacific and Medicure is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Health Care and Medicure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medicure and Pacific Health 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 Pacific Health Care are associated (or correlated) with Medicure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medicure has no effect on the direction of Pacific Health i.e., Pacific Health and Medicure go up and down completely randomly.

Pair Corralation between Pacific Health and Medicure

Given the investment horizon of 90 days Pacific Health Care is expected to generate 0.88 times more return on investment than Medicure. However, Pacific Health Care is 1.14 times less risky than Medicure. It trades about 0.01 of its potential returns per unit of risk. Medicure is currently generating about -0.01 per unit of risk. If you would invest  87.00  in Pacific Health Care on September 12, 2024 and sell it today you would lose (9.00) from holding Pacific Health Care or give up 10.34% of portfolio value over 90 days.

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

Pacific Health Care  vs.  Medicure

Pacific Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacific Health Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Pacific Health is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Medicure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medicure has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward-looking indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Pacific Health and Medicure

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

The idea behind Pacific Health Care and Medicure 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.