Correlation Between Pro Medicus and Light Wonder

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

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

Diversification Opportunities for Pro Medicus and Light Wonder

0.48

Correlation Coefficient

Pro Medicus  Light Wonder

Very weak diversification

The 3 months correlation between Pro and Light is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Pro Medicus and Light Wonder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Light Wonder 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 Light Wonder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Light Wonder has no effect on the direction of Pro Medicus i.e., Pro Medicus and Light Wonder go up and down completely randomly.

Pair Corralation between Pro Medicus and Light Wonder

Assuming the 90 days trading horizon Pro Medicus is expected to generate 1.83 times more return on investment than Light Wonder. However, Pro Medicus is 1.83 times more volatile than Light Wonder. It trades about 0.13 of its potential returns per unit of risk. Light Wonder is currently generating about -0.22 per unit of risk. If you would invest  23,000  in Pro Medicus on September 27, 2024 and sell it today you would earn a total of  2,019  from holding Pro Medicus or generate 8.78% return on investment over 90 days.

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

Pro Medicus  vs.  Light Wonder

Pro Medicus

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pro Medicus are ranked lower than 20 (%) 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.

Light Wonder

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Light Wonder are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Light Wonder is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Pro Medicus and Light Wonder

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

The idea behind Pro Medicus and Light Wonder 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.