Correlation Between EGF Theramed and M3

Can any of the company-specific risk be diversified away by investing in both EGF Theramed and M3 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 EGF Theramed and M3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between EGF Theramed Health and M3 Inc, you can compare the effects of market volatilities on EGF Theramed and M3 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 EGF Theramed with a short position of M3. Check out your portfolio center. Please also check ongoing floating volatility patterns of EGF Theramed and M3.

Diversification Opportunities for EGF Theramed and M3

-0.53

Correlation Coefficient

EGF Theramed  M3

Excellent diversification

The 3 months correlation between EGF and M3 is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding EGF Theramed Health and M3 Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M3 Inc and EGF Theramed 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 EGF Theramed Health are associated (or correlated) with M3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M3 Inc has no effect on the direction of EGF Theramed i.e., EGF Theramed and M3 go up and down completely randomly.

Pair Corralation between EGF Theramed and M3

Assuming the 90 days horizon EGF Theramed Health is expected to generate 13.84 times more return on investment than M3. However, EGF Theramed is 13.84 times more volatile than M3 Inc. It trades about 0.07 of its potential returns per unit of risk. M3 Inc is currently generating about -0.08 per unit of risk. If you would invest  23.00  in EGF Theramed Health on September 14, 2024 and sell it today you would lose (1.00) from holding EGF Theramed Health or give up 4.35% of portfolio value over 90 days.

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

EGF Theramed Health  vs.  M3 Inc

EGF Theramed Health

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EGF Theramed Health are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent technical indicators, EGF Theramed reported solid returns over the last few months and may actually be approaching a breakup point.

M3 Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days M3 Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, M3 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with EGF Theramed and M3

The main advantage of trading using opposite EGF Theramed and M3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EGF Theramed position performs unexpectedly, M3 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 M3 will offset losses from the drop in M3's long position.

The idea behind EGF Theramed Health and M3 Inc 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.