Correlation Between Medical Packaging and Act Financial

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

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

Diversification Opportunities for Medical Packaging and Act Financial

0.34

Correlation Coefficient

Medical Packaging  Act Financial

Weak diversification

The 3 months correlation between Medical and Act is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Medical Packaging and Act Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Act Financial and Medical Packaging 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 Medical Packaging are associated (or correlated) with Act Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Act Financial has no effect on the direction of Medical Packaging i.e., Medical Packaging and Act Financial go up and down completely randomly.

Pair Corralation between Medical Packaging and Act Financial

Assuming the 90 days trading horizon Medical Packaging is expected to under-perform the Act Financial. But the stock apears to be less risky and, when comparing its historical volatility, Medical Packaging is 1.31 times less risky than Act Financial. The stock trades about -0.03 of its potential returns per unit of risk. The Act Financial is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  327.00  in Act Financial on September 17, 2024 and sell it today you would earn a total of  6.00  from holding Act Financial or generate 1.83% return on investment over 90 days.

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

Medical Packaging  vs.  Act Financial

Medical Packaging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medical Packaging has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Medical Packaging is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Act Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Act Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Act Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Medical Packaging and Act Financial

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

The idea behind Medical Packaging and Act Financial 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.