Correlation Between River and Fresenius Medical

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

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

Diversification Opportunities for River and Fresenius Medical

0.34

Correlation Coefficient

River  Fresenius Medical

Weak diversification

The 3 months correlation between River and Fresenius is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding River and Mercantile and Fresenius Medical Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresenius Medical Care and River 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 River and Mercantile are associated (or correlated) with Fresenius Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresenius Medical Care has no effect on the direction of River i.e., River and Fresenius Medical go up and down completely randomly.

Pair Corralation between River and Fresenius Medical

Assuming the 90 days trading horizon River is expected to generate 3.59 times less return on investment than Fresenius Medical. But when comparing it to its historical volatility, River and Mercantile is 1.78 times less risky than Fresenius Medical. It trades about 0.02 of its potential returns per unit of risk. Fresenius Medical Care is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,260  in Fresenius Medical Care on October 22, 2024 and sell it today you would earn a total of  1,223  from holding Fresenius Medical Care or generate 37.52% return on investment over 90 days.

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

River and Mercantile  vs.  Fresenius Medical Care

River and Mercantile

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in River and Mercantile are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, River is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Fresenius Medical Care

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fresenius Medical Care are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fresenius Medical unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with River and Fresenius Medical

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

The idea behind River and Mercantile and Fresenius Medical Care 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.