Correlation Between MedFirst Healthcare and Pacific Hospital
Can any of the company-specific risk be diversified away by investing in both MedFirst Healthcare and Pacific Hospital 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 MedFirst Healthcare and Pacific Hospital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MedFirst Healthcare Services and Pacific Hospital Supply, you can compare the effects of market volatilities on MedFirst Healthcare and Pacific Hospital 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 MedFirst Healthcare with a short position of Pacific Hospital. Check out your portfolio center. Please also check ongoing floating volatility patterns of MedFirst Healthcare and Pacific Hospital.
Diversification Opportunities for MedFirst Healthcare and Pacific Hospital
-0.82 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between MedFirst and Pacific is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding MedFirst Healthcare Services and Pacific Hospital Supply in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Hospital Supply and MedFirst Healthcare 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 MedFirst Healthcare Services are associated (or correlated) with Pacific Hospital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Hospital Supply has no effect on the direction of MedFirst Healthcare i.e., MedFirst Healthcare and Pacific Hospital go up and down completely randomly.
Pair Corralation between MedFirst Healthcare and Pacific Hospital
Assuming the 90 days trading horizon MedFirst Healthcare Services is expected to under-perform the Pacific Hospital. But the stock apears to be less risky and, when comparing its historical volatility, MedFirst Healthcare Services is 1.14 times less risky than Pacific Hospital. The stock trades about -0.07 of its potential returns per unit of risk. The Pacific Hospital Supply is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 8,270 in Pacific Hospital Supply on November 3, 2024 and sell it today you would earn a total of 1,190 from holding Pacific Hospital Supply or generate 14.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MedFirst Healthcare Services vs. Pacific Hospital Supply
Performance |
| Timeline |
| MedFirst Healthcare |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Pacific Hospital Supply |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
MedFirst Healthcare and Pacific Hospital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MedFirst Healthcare and Pacific Hospital
The main advantage of trading using opposite MedFirst Healthcare and Pacific Hospital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MedFirst Healthcare position performs unexpectedly, Pacific Hospital 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 Pacific Hospital will offset losses from the drop in Pacific Hospital's long position.The idea behind MedFirst Healthcare Services and Pacific Hospital Supply 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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