Correlation Between Transportadora and Medicover

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

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

Diversification Opportunities for Transportadora and Medicover

-0.69

Correlation Coefficient

Transportadora  Medicover

Excellent diversification

The 3 months correlation between Transportadora and Medicover is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Transportadora de Gas and Medicover AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medicover AB and Transportadora 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 Transportadora de Gas are associated (or correlated) with Medicover. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medicover AB has no effect on the direction of Transportadora i.e., Transportadora and Medicover go up and down completely randomly.

Pair Corralation between Transportadora and Medicover

Assuming the 90 days trading horizon Transportadora de Gas is expected to generate 2.9 times more return on investment than Medicover. However, Transportadora is 2.9 times more volatile than Medicover AB. It trades about 0.16 of its potential returns per unit of risk. Medicover AB is currently generating about -0.08 per unit of risk. If you would invest  1,870  in Transportadora de Gas on September 15, 2024 and sell it today you would earn a total of  850.00  from holding Transportadora de Gas or generate 45.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.48%
Values	Daily Returns

Transportadora de Gas  vs.  Medicover AB

Transportadora de Gas

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Transportadora de Gas are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward-looking signals, Transportadora reported solid returns over the last few months and may actually be approaching a breakup point.

Medicover AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medicover AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Transportadora and Medicover

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

The idea behind Transportadora de Gas and Medicover AB 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.