Correlation Between Stem Holdings and Medipharm Labs

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

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

Diversification Opportunities for Stem Holdings and Medipharm Labs

0.13

Correlation Coefficient

Stem Holdings  Medipharm Labs

Average diversification

The 3 months correlation between Stem and Medipharm is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Stem Holdings and Medipharm Labs Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medipharm Labs Corp and Stem Holdings 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 Stem Holdings are associated (or correlated) with Medipharm Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medipharm Labs Corp has no effect on the direction of Stem Holdings i.e., Stem Holdings and Medipharm Labs go up and down completely randomly.

Pair Corralation between Stem Holdings and Medipharm Labs

Given the investment horizon of 90 days Stem Holdings is expected to under-perform the Medipharm Labs. In addition to that, Stem Holdings is 2.72 times more volatile than Medipharm Labs Corp. It trades about -0.13 of its total potential returns per unit of risk. Medipharm Labs Corp is currently generating about 0.02 per unit of volatility. If you would invest  4.80  in Medipharm Labs Corp on December 1, 2024 and sell it today you would lose (0.10) from holding Medipharm Labs Corp or give up 2.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Stem Holdings  vs.  Medipharm Labs Corp

Stem Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stem Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Medipharm Labs Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Medipharm Labs Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, Medipharm Labs is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Stem Holdings and Medipharm Labs

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

The idea behind Stem Holdings and Medipharm Labs Corp 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.