Correlation Between Rompetrol Rafi and Med Life

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

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

Diversification Opportunities for Rompetrol Rafi and Med Life

0.08

Correlation Coefficient

Rompetrol Rafi  Med Life

Significant diversification

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

Pair Corralation between Rompetrol Rafi and Med Life

Assuming the 90 days trading horizon Rompetrol Rafi is expected to under-perform the Med Life. In addition to that, Rompetrol Rafi is 1.4 times more volatile than Med Life SA. It trades about -0.01 of its total potential returns per unit of risk. Med Life SA is currently generating about 0.04 per unit of volatility. If you would invest  581.00  in Med Life SA on December 21, 2024 and sell it today you would earn a total of  13.00  from holding Med Life SA or generate 2.24% return on investment over 90 days.

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

Rompetrol Rafi  vs.  Med Life SA

Rompetrol Rafi

Risk-Adjusted Performance

Very Weak

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

Med Life SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Med Life SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Med Life is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Rompetrol Rafi and Med Life

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

The idea behind Rompetrol Rafi and Med Life SA 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.