Correlation Between BZAM and Medipharm Labs

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

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

Diversification Opportunities for BZAM and Medipharm Labs

0.02

Correlation Coefficient

BZAM  Medipharm Labs

Significant diversification

The 3 months correlation between BZAM and Medipharm is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding BZAM 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 BZAM 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 BZAM 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 BZAM i.e., BZAM and Medipharm Labs go up and down completely randomly.

Pair Corralation between BZAM and Medipharm Labs

Assuming the 90 days horizon BZAM is expected to generate 51.31 times more return on investment than Medipharm Labs. However, BZAM is 51.31 times more volatile than Medipharm Labs Corp. It trades about 0.13 of its potential returns per unit of risk. Medipharm Labs Corp is currently generating about -0.02 per unit of risk. If you would invest  1.40  in BZAM on September 20, 2024 and sell it today you would lose (1.40) from holding BZAM or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

BZAM  vs.  Medipharm Labs Corp

BZAM

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BZAM are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, BZAM reported solid returns over the last few months and may actually be approaching a breakup point.

Medipharm Labs Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medipharm Labs Corp has generated negative risk-adjusted returns adding no value to investors with long positions. 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 BZAM and Medipharm Labs

The main advantage of trading using opposite BZAM and Medipharm Labs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BZAM 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 BZAM 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.