Correlation Between Pro Medicus and Ecofibre

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

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

Diversification Opportunities for Pro Medicus and Ecofibre

-0.51

Correlation Coefficient

Pro Medicus  Ecofibre

Excellent diversification

The 3 months correlation between Pro and Ecofibre is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Pro Medicus and Ecofibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecofibre 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 Ecofibre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecofibre has no effect on the direction of Pro Medicus i.e., Pro Medicus and Ecofibre go up and down completely randomly.

Pair Corralation between Pro Medicus and Ecofibre

Assuming the 90 days trading horizon Pro Medicus is expected to generate 0.32 times more return on investment than Ecofibre. However, Pro Medicus is 3.09 times less risky than Ecofibre. It trades about 0.24 of its potential returns per unit of risk. Ecofibre is currently generating about 0.02 per unit of risk. If you would invest  17,825  in Pro Medicus on September 28, 2024 and sell it today you would earn a total of  7,194  from holding Pro Medicus or generate 40.36% return on investment over 90 days.

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

Pro Medicus  vs.  Ecofibre

Pro Medicus

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pro Medicus are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Pro Medicus unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ecofibre

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ecofibre are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Ecofibre may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Pro Medicus and Ecofibre

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

The idea behind Pro Medicus and Ecofibre 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 Valuation module to check real value of public entities based on technical and fundamental data.