Correlation Between Medtronic PLC and CareCloud

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

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

Diversification Opportunities for Medtronic PLC and CareCloud

-0.57

Correlation Coefficient

Medtronic PLC  CareCloud

Excellent diversification

The 3 months correlation between Medtronic and CareCloud is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Medtronic PLC and CareCloud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareCloud and Medtronic PLC 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 Medtronic PLC are associated (or correlated) with CareCloud. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareCloud has no effect on the direction of Medtronic PLC i.e., Medtronic PLC and CareCloud go up and down completely randomly.

Pair Corralation between Medtronic PLC and CareCloud

Considering the 90-day investment horizon Medtronic PLC is expected to under-perform the CareCloud. But the stock apears to be less risky and, when comparing its historical volatility, Medtronic PLC is 5.0 times less risky than CareCloud. The stock trades about -0.02 of its potential returns per unit of risk. The CareCloud is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  240.00  in CareCloud on September 3, 2024 and sell it today you would earn a total of  76.00  from holding CareCloud or generate 31.67% return on investment over 90 days.

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

Medtronic PLC  vs.  CareCloud

Medtronic PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medtronic PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Medtronic PLC is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

CareCloud

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CareCloud are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, CareCloud exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Medtronic PLC and CareCloud

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

The idea behind Medtronic PLC and CareCloud 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.