Correlation Between Exchange Income and Medical Facilities

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

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

Diversification Opportunities for Exchange Income and Medical Facilities

0.84

Correlation Coefficient

Exchange Income  Medical Facilities

Very poor diversification

The 3 months correlation between Exchange and Medical is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Exchange Income and Medical Facilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Facilities and Exchange Income 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 Exchange Income are associated (or correlated) with Medical Facilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Facilities has no effect on the direction of Exchange Income i.e., Exchange Income and Medical Facilities go up and down completely randomly.

Pair Corralation between Exchange Income and Medical Facilities

Assuming the 90 days trading horizon Exchange Income is expected to generate 1.34 times less return on investment than Medical Facilities. But when comparing it to its historical volatility, Exchange Income is 1.62 times less risky than Medical Facilities. It trades about 0.15 of its potential returns per unit of risk. Medical Facilities is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,379  in Medical Facilities on September 20, 2024 and sell it today you would earn a total of  188.00  from holding Medical Facilities or generate 13.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Exchange Income  vs.  Medical Facilities

Exchange Income

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Exchange Income are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, Exchange Income may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Medical Facilities

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Facilities are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Medical Facilities displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Exchange Income and Medical Facilities

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

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