Correlation Between Gilat Telecom and Medivie Therapeutic

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

By analyzing existing cross correlation between Gilat Telecom Global and Medivie Therapeutic, you can compare the effects of market volatilities on Gilat Telecom and Medivie Therapeutic 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 Gilat Telecom with a short position of Medivie Therapeutic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gilat Telecom and Medivie Therapeutic.

Diversification Opportunities for Gilat Telecom and Medivie Therapeutic

-0.7

Correlation Coefficient

Gilat Telecom  Medivie Therapeutic

Excellent diversification

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

Pair Corralation between Gilat Telecom and Medivie Therapeutic

Assuming the 90 days trading horizon Gilat Telecom is expected to generate 1.6 times less return on investment than Medivie Therapeutic. But when comparing it to its historical volatility, Gilat Telecom Global is 2.12 times less risky than Medivie Therapeutic. It trades about 0.22 of its potential returns per unit of risk. Medivie Therapeutic is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  3,200  in Medivie Therapeutic on September 26, 2024 and sell it today you would earn a total of  550.00  from holding Medivie Therapeutic or generate 17.19% return on investment over 90 days.

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

Gilat Telecom Global  vs.  Medivie Therapeutic

Gilat Telecom Global

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gilat Telecom Global are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gilat Telecom sustained solid returns over the last few months and may actually be approaching a breakup point.

Medivie Therapeutic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medivie Therapeutic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Gilat Telecom and Medivie Therapeutic

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

The idea behind Gilat Telecom Global and Medivie Therapeutic 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.