Correlation Between Fresenius and MEDICAL FACILITIES

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

By analyzing existing cross correlation between Fresenius SE Co and MEDICAL FACILITIES NEW, you can compare the effects of market volatilities on Fresenius 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 Fresenius with a short position of MEDICAL FACILITIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fresenius and MEDICAL FACILITIES.

Diversification Opportunities for Fresenius and MEDICAL FACILITIES

-0.56

Correlation Coefficient

Fresenius  MEDICAL FACILITIES

Excellent diversification

The 3 months correlation between Fresenius and MEDICAL is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Fresenius SE Co and MEDICAL FACILITIES NEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEDICAL FACILITIES NEW and Fresenius 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 Fresenius SE Co 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 NEW has no effect on the direction of Fresenius i.e., Fresenius and MEDICAL FACILITIES go up and down completely randomly.

Pair Corralation between Fresenius and MEDICAL FACILITIES

Assuming the 90 days horizon Fresenius is expected to generate 12.62 times less return on investment than MEDICAL FACILITIES. But when comparing it to its historical volatility, Fresenius SE Co is 1.47 times less risky than MEDICAL FACILITIES. It trades about 0.02 of its potential returns per unit of risk. MEDICAL FACILITIES NEW is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  936.00  in MEDICAL FACILITIES NEW on September 3, 2024 and sell it today you would earn a total of  154.00  from holding MEDICAL FACILITIES NEW or generate 16.45% return on investment over 90 days.

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

Fresenius SE Co  vs.  MEDICAL FACILITIES NEW

Fresenius SE

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fresenius SE Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Fresenius is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

MEDICAL FACILITIES NEW

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Fresenius and MEDICAL FACILITIES

The main advantage of trading using opposite Fresenius and MEDICAL FACILITIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fresenius 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's long position.

The idea behind Fresenius SE Co and MEDICAL FACILITIES NEW 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.