Correlation Between Medicure and Willow Biosciences

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

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

Diversification Opportunities for Medicure and Willow Biosciences

0.53

Correlation Coefficient

Medicure  Willow Biosciences

Very weak diversification

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

Pair Corralation between Medicure and Willow Biosciences

Assuming the 90 days horizon Medicure is expected to generate 0.73 times more return on investment than Willow Biosciences. However, Medicure is 1.38 times less risky than Willow Biosciences. It trades about -0.03 of its potential returns per unit of risk. Willow Biosciences is currently generating about -0.06 per unit of risk. If you would invest  80.00  in Medicure on September 15, 2024 and sell it today you would lose (10.00) from holding Medicure or give up 12.5% of portfolio value over 90 days.

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

Medicure  vs.  Willow Biosciences

Medicure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medicure has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward-looking indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Willow Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Medicure and Willow Biosciences

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

The idea behind Medicure and Willow Biosciences 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.