Correlation Between VistaREIT and Medco Holdings

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

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

Diversification Opportunities for VistaREIT and Medco Holdings

-0.52

Correlation Coefficient

VistaREIT  Medco Holdings

Excellent diversification

The 3 months correlation between VistaREIT and Medco is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding VistaREIT and Medco Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medco Holdings and VistaREIT 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 VistaREIT are associated (or correlated) with Medco Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medco Holdings has no effect on the direction of VistaREIT i.e., VistaREIT and Medco Holdings go up and down completely randomly.

Pair Corralation between VistaREIT and Medco Holdings

Assuming the 90 days trading horizon VistaREIT is expected to generate 1.03 times less return on investment than Medco Holdings. But when comparing it to its historical volatility, VistaREIT is 4.82 times less risky than Medco Holdings. It trades about 0.12 of its potential returns per unit of risk. Medco Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Medco Holdings on November 19, 2024 and sell it today you would earn a total of  0.00  from holding Medco Holdings or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	37.29%
Values	Daily Returns

VistaREIT  vs.  Medco Holdings

VistaREIT

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VistaREIT are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady technical and fundamental indicators, VistaREIT may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Medco Holdings

Risk-Adjusted Performance

Weak

Over the last 90 days Medco Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather unsteady technical and fundamental indicators, Medco Holdings may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with VistaREIT and Medco Holdings

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

The idea behind VistaREIT and Medco Holdings 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.