Correlation Between MEDIPOST and Design

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

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

Diversification Opportunities for MEDIPOST and Design

-0.54

Correlation Coefficient

MEDIPOST  Design

Excellent diversification

The 3 months correlation between MEDIPOST and Design is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding MEDIPOST Co and Design Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Design and MEDIPOST 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 MEDIPOST Co are associated (or correlated) with Design. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Design has no effect on the direction of MEDIPOST i.e., MEDIPOST and Design go up and down completely randomly.

Pair Corralation between MEDIPOST and Design

Assuming the 90 days trading horizon MEDIPOST Co is expected to generate 0.64 times more return on investment than Design. However, MEDIPOST Co is 1.56 times less risky than Design. It trades about 0.21 of its potential returns per unit of risk. Design Co is currently generating about 0.03 per unit of risk. If you would invest  594,000  in MEDIPOST Co on September 22, 2024 and sell it today you would earn a total of  641,000  from holding MEDIPOST Co or generate 107.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

MEDIPOST Co  vs.  Design Co

MEDIPOST

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MEDIPOST Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, MEDIPOST sustained solid returns over the last few months and may actually be approaching a breakup point.

Design

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Design Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Design sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MEDIPOST and Design

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

The idea behind MEDIPOST Co and Design Co 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.