Correlation Between VAT Group and Medacta Group

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

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

Diversification Opportunities for VAT Group and Medacta Group

0.91

Correlation Coefficient

VAT Group  Medacta Group

Almost no diversification

The 3 months correlation between VAT and Medacta is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding VAT Group AG and Medacta Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medacta Group SA and VAT Group 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 VAT Group AG are associated (or correlated) with Medacta Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medacta Group SA has no effect on the direction of VAT Group i.e., VAT Group and Medacta Group go up and down completely randomly.

Pair Corralation between VAT Group and Medacta Group

Assuming the 90 days trading horizon VAT Group AG is expected to under-perform the Medacta Group. In addition to that, VAT Group is 1.17 times more volatile than Medacta Group SA. It trades about -0.12 of its total potential returns per unit of risk. Medacta Group SA is currently generating about -0.09 per unit of volatility. If you would invest  12,380  in Medacta Group SA on September 16, 2024 and sell it today you would lose (1,320) from holding Medacta Group SA or give up 10.66% of portfolio value over 90 days.

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

VAT Group AG  vs.  Medacta Group SA

VAT Group AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VAT Group AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Medacta Group SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medacta Group SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with VAT Group and Medacta Group

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

The idea behind VAT Group AG and Medacta Group 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.