Correlation Between Landmark Cars and Medplus Health

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

By analyzing existing cross correlation between Landmark Cars Limited and Medplus Health Services, you can compare the effects of market volatilities on Landmark Cars and Medplus Health 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 Landmark Cars with a short position of Medplus Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Landmark Cars and Medplus Health.

Diversification Opportunities for Landmark Cars and Medplus Health

0.04

Correlation Coefficient

Landmark Cars  Medplus Health

Significant diversification

The 3 months correlation between Landmark and Medplus is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Landmark Cars Limited and Medplus Health Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medplus Health Services and Landmark Cars 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 Landmark Cars Limited are associated (or correlated) with Medplus Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medplus Health Services has no effect on the direction of Landmark Cars i.e., Landmark Cars and Medplus Health go up and down completely randomly.

Pair Corralation between Landmark Cars and Medplus Health

Assuming the 90 days trading horizon Landmark Cars is expected to generate 1.06 times less return on investment than Medplus Health. In addition to that, Landmark Cars is 1.21 times more volatile than Medplus Health Services. It trades about 0.1 of its total potential returns per unit of risk. Medplus Health Services is currently generating about 0.12 per unit of volatility. If you would invest  69,875  in Medplus Health Services on September 3, 2024 and sell it today you would earn a total of  8,395  from holding Medplus Health Services or generate 12.01% return on investment over 90 days.

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

Landmark Cars Limited  vs.  Medplus Health Services

Landmark Cars Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Landmark Cars Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Landmark Cars may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Medplus Health Services

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Medplus Health Services are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Medplus Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Landmark Cars and Medplus Health

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

The idea behind Landmark Cars Limited and Medplus Health Services 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.