Correlation Between Medincell and Transgene

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

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

Diversification Opportunities for Medincell and Transgene

-0.57

Correlation Coefficient

Medincell  Transgene

Excellent diversification

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

Pair Corralation between Medincell and Transgene

Assuming the 90 days trading horizon Medincell SA is expected to generate 0.87 times more return on investment than Transgene. However, Medincell SA is 1.15 times less risky than Transgene. It trades about 0.01 of its potential returns per unit of risk. Transgene SA is currently generating about -0.15 per unit of risk. If you would invest  1,648  in Medincell SA on September 17, 2024 and sell it today you would lose (18.00) from holding Medincell SA or give up 1.09% of portfolio value over 90 days.

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

Medincell SA  vs.  Transgene SA

Medincell SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medincell SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Medincell is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Transgene SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transgene SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Medincell and Transgene

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

The idea behind Medincell SA and Transgene SA 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.