Correlation Between Medical Facilities and Forward Water

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

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

Diversification Opportunities for Medical Facilities and Forward Water

-0.7

Correlation Coefficient

Medical Facilities  Forward Water

Excellent diversification

The 3 months correlation between Medical and Forward is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Medical Facilities and Forward Water Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forward Water Techno and Medical Facilities 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 Medical Facilities are associated (or correlated) with Forward Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forward Water Techno has no effect on the direction of Medical Facilities i.e., Medical Facilities and Forward Water go up and down completely randomly.

Pair Corralation between Medical Facilities and Forward Water

Assuming the 90 days horizon Medical Facilities is expected to generate 2.37 times less return on investment than Forward Water. But when comparing it to its historical volatility, Medical Facilities is 9.91 times less risky than Forward Water. It trades about 0.14 of its potential returns per unit of risk. Forward Water Technologies is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  40.00  in Forward Water Technologies on September 21, 2024 and sell it today you would lose (32.00) from holding Forward Water Technologies or give up 80.0% of portfolio value over 90 days.

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

Medical Facilities  vs.  Forward Water Technologies

Medical Facilities

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Facilities are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Medical Facilities may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Forward Water Techno

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Forward Water Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Forward Water is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Medical Facilities and Forward Water

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

The idea behind Medical Facilities and Forward Water Technologies 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..