Correlation Between Cardiol Therapeutics and Medipharm Labs

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

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

Diversification Opportunities for Cardiol Therapeutics and Medipharm Labs

-0.21

Correlation Coefficient

Cardiol Therapeutics  Medipharm Labs

Very good diversification

The 3 months correlation between Cardiol and Medipharm is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Cardiol Therapeutics Class 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 Cardiol Therapeutics 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 Cardiol Therapeutics Class 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 Cardiol Therapeutics i.e., Cardiol Therapeutics and Medipharm Labs go up and down completely randomly.

Pair Corralation between Cardiol Therapeutics and Medipharm Labs

Assuming the 90 days trading horizon Cardiol Therapeutics Class is expected to under-perform the Medipharm Labs. But the stock apears to be less risky and, when comparing its historical volatility, Cardiol Therapeutics Class is 1.38 times less risky than Medipharm Labs. The stock trades about -0.03 of its potential returns per unit of risk. The Medipharm Labs Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  6.50  in Medipharm Labs Corp on September 2, 2024 and sell it today you would earn a total of  0.50  from holding Medipharm Labs Corp or generate 7.69% return on investment over 90 days.

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

Cardiol Therapeutics Class  vs.  Medipharm Labs Corp

Cardiol Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cardiol Therapeutics Class has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Medipharm Labs Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Medipharm Labs Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Medipharm Labs displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cardiol Therapeutics and Medipharm Labs

The main advantage of trading using opposite Cardiol Therapeutics and Medipharm Labs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardiol Therapeutics 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 Cardiol Therapeutics Class 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.