Correlation Between Medartis Holding and VAT Group

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

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

Diversification Opportunities for Medartis Holding and VAT Group

0.54

Correlation Coefficient

Medartis Holding  VAT Group

Very weak diversification

The 3 months correlation between Medartis and VAT is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Medartis Holding AG and VAT Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VAT Group AG and Medartis Holding 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 Medartis Holding AG are associated (or correlated) with VAT Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VAT Group AG has no effect on the direction of Medartis Holding i.e., Medartis Holding and VAT Group go up and down completely randomly.

Pair Corralation between Medartis Holding and VAT Group

Assuming the 90 days trading horizon Medartis Holding AG is expected to generate 1.51 times more return on investment than VAT Group. However, Medartis Holding is 1.51 times more volatile than VAT Group AG. It trades about -0.02 of its potential returns per unit of risk. VAT Group AG is currently generating about -0.12 per unit of risk. If you would invest  5,790  in Medartis Holding AG on September 16, 2024 and sell it today you would lose (340.00) from holding Medartis Holding AG or give up 5.87% of portfolio value over 90 days.

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

Medartis Holding AG  vs.  VAT Group AG

Medartis Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medartis Holding AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Medartis Holding is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

VAT Group AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VAT Group AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Medartis Holding and VAT Group

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

The idea behind Medartis Holding AG and VAT Group AG 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.