Correlation Between Service International and MEDIFAST INC

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

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

Diversification Opportunities for Service International and MEDIFAST INC

0.49

Correlation Coefficient

Service International  MEDIFAST INC

Very weak diversification

The 3 months correlation between Service and MEDIFAST is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Service International and MEDIFAST INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEDIFAST INC and Service International 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 Service International are associated (or correlated) with MEDIFAST INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEDIFAST INC has no effect on the direction of Service International i.e., Service International and MEDIFAST INC go up and down completely randomly.

Pair Corralation between Service International and MEDIFAST INC

Considering the 90-day investment horizon Service International is expected to generate 0.49 times more return on investment than MEDIFAST INC. However, Service International is 2.04 times less risky than MEDIFAST INC. It trades about 0.04 of its potential returns per unit of risk. MEDIFAST INC is currently generating about -0.1 per unit of risk. If you would invest  6,735  in Service International on September 4, 2024 and sell it today you would earn a total of  2,079  from holding Service International or generate 30.87% return on investment over 90 days.

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

Service International  vs.  MEDIFAST INC

Service International

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Service International are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating fundamental indicators, Service International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

MEDIFAST INC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MEDIFAST INC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, MEDIFAST INC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Service International and MEDIFAST INC

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

The idea behind Service International and MEDIFAST INC 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.