Correlation Between IMPERIAL TOBACCO and MeVis Medical

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

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

Diversification Opportunities for IMPERIAL TOBACCO and MeVis Medical

0.7

Correlation Coefficient

IMPERIAL TOBACCO  MeVis Medical

Poor diversification

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

Pair Corralation between IMPERIAL TOBACCO and MeVis Medical

Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to under-perform the MeVis Medical. But the stock apears to be less risky and, when comparing its historical volatility, IMPERIAL TOBACCO is 1.76 times less risky than MeVis Medical. The stock trades about -0.03 of its potential returns per unit of risk. The MeVis Medical Solutions is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,400  in MeVis Medical Solutions on September 29, 2024 and sell it today you would earn a total of  40.00  from holding MeVis Medical Solutions or generate 1.67% return on investment over 90 days.

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

IMPERIAL TOBACCO   vs.  MeVis Medical Solutions

IMPERIAL TOBACCO

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IMPERIAL TOBACCO are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental drivers, IMPERIAL TOBACCO unveiled solid returns over the last few months and may actually be approaching a breakup point.

MeVis Medical Solutions

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MeVis Medical Solutions are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, MeVis Medical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IMPERIAL TOBACCO and MeVis Medical

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

The idea behind IMPERIAL TOBACCO and MeVis Medical Solutions 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.