Correlation Between Pro Medicus and CSL

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

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

Diversification Opportunities for Pro Medicus and CSL

0.27

Correlation Coefficient

Pro Medicus  CSL

Modest diversification

The 3 months correlation between Pro and CSL is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Pro Medicus and CSL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL and Pro Medicus 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 Pro Medicus are associated (or correlated) with CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL has no effect on the direction of Pro Medicus i.e., Pro Medicus and CSL go up and down completely randomly.

Pair Corralation between Pro Medicus and CSL

Assuming the 90 days trading horizon Pro Medicus is expected to under-perform the CSL. In addition to that, Pro Medicus is 2.54 times more volatile than CSL. It trades about -0.1 of its total potential returns per unit of risk. CSL is currently generating about -0.15 per unit of volatility. If you would invest  28,081  in CSL on December 28, 2024 and sell it today you would lose (2,840) from holding CSL or give up 10.11% of portfolio value over 90 days.

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

Pro Medicus  vs.  CSL

Pro Medicus

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pro Medicus 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 technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

CSL

Risk-Adjusted Performance

Very Weak

Over the last 90 days CSL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's essential 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 Pro Medicus and CSL

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

The idea behind Pro Medicus and CSL 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.