Correlation Between Medibank Private and Hotel Property

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

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

Diversification Opportunities for Medibank Private and Hotel Property

0.56

Correlation Coefficient

Medibank Private  Hotel Property

Very weak diversification

The 3 months correlation between Medibank and Hotel is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Medibank Private and Hotel Property Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotel Property Inves and Medibank Private 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 Medibank Private are associated (or correlated) with Hotel Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotel Property Inves has no effect on the direction of Medibank Private i.e., Medibank Private and Hotel Property go up and down completely randomly.

Pair Corralation between Medibank Private and Hotel Property

Assuming the 90 days trading horizon Medibank Private is expected to generate 30.11 times less return on investment than Hotel Property. But when comparing it to its historical volatility, Medibank Private is 1.38 times less risky than Hotel Property. It trades about 0.0 of its potential returns per unit of risk. Hotel Property Investments is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  372.00  in Hotel Property Investments on September 24, 2024 and sell it today you would earn a total of  6.00  from holding Hotel Property Investments or generate 1.61% return on investment over 90 days.

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

Medibank Private  vs.  Hotel Property Investments

Medibank Private

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Medibank Private are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Medibank Private is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Hotel Property Inves

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hotel Property Investments are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, Hotel Property is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Medibank Private and Hotel Property

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

The idea behind Medibank Private and Hotel Property Investments 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.