Correlation Between Medigen Biotechnology and PharmaEngine
Can any of the company-specific risk be diversified away by investing in both Medigen Biotechnology and PharmaEngine 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 Medigen Biotechnology and PharmaEngine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Medigen Biotechnology and PharmaEngine, you can compare the effects of market volatilities on Medigen Biotechnology and PharmaEngine 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 Medigen Biotechnology with a short position of PharmaEngine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medigen Biotechnology and PharmaEngine.
Diversification Opportunities for Medigen Biotechnology and PharmaEngine
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Medigen and PharmaEngine is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Medigen Biotechnology and PharmaEngine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PharmaEngine and Medigen Biotechnology 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 Medigen Biotechnology are associated (or correlated) with PharmaEngine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PharmaEngine has no effect on the direction of Medigen Biotechnology i.e., Medigen Biotechnology and PharmaEngine go up and down completely randomly.
Pair Corralation between Medigen Biotechnology and PharmaEngine
Assuming the 90 days trading horizon Medigen Biotechnology is expected to generate 3.77 times less return on investment than PharmaEngine. But when comparing it to its historical volatility, Medigen Biotechnology is 2.42 times less risky than PharmaEngine. It trades about 0.04 of its potential returns per unit of risk. PharmaEngine is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 9,360 in PharmaEngine on November 3, 2024 and sell it today you would earn a total of 250.00 from holding PharmaEngine or generate 2.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Medigen Biotechnology vs. PharmaEngine
Performance |
| Timeline |
| Medigen Biotechnology |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| PharmaEngine |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Medigen Biotechnology and PharmaEngine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Medigen Biotechnology and PharmaEngine
The main advantage of trading using opposite Medigen Biotechnology and PharmaEngine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medigen Biotechnology position performs unexpectedly, PharmaEngine 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 PharmaEngine will offset losses from the drop in PharmaEngine's long position.The idea behind Medigen Biotechnology and PharmaEngine 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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