Correlation Between Medco Holdings and COL Financial
Can any of the company-specific risk be diversified away by investing in both Medco Holdings and COL Financial 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 Medco Holdings and COL Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Medco Holdings and COL Financial Group, you can compare the effects of market volatilities on Medco Holdings and COL Financial 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 Medco Holdings with a short position of COL Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medco Holdings and COL Financial.
Diversification Opportunities for Medco Holdings and COL Financial
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Medco and COL is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Medco Holdings and COL Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COL Financial Group and Medco Holdings 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 Medco Holdings are associated (or correlated) with COL Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COL Financial Group has no effect on the direction of Medco Holdings i.e., Medco Holdings and COL Financial go up and down completely randomly.
Pair Corralation between Medco Holdings and COL Financial
Assuming the 90 days trading horizon Medco Holdings is expected to generate 5.55 times more return on investment than COL Financial. However, Medco Holdings is 5.55 times more volatile than COL Financial Group. It trades about 0.07 of its potential returns per unit of risk. COL Financial Group is currently generating about -0.04 per unit of risk. If you would invest 8.60 in Medco Holdings on August 26, 2024 and sell it today you would earn a total of 2.40 from holding Medco Holdings or generate 27.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 52.19% |
| Values | Daily Returns |
Medco Holdings vs. COL Financial Group
Performance |
| Timeline |
| Medco Holdings |
| COL Financial Group |
Medco Holdings and COL Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Medco Holdings and COL Financial
The main advantage of trading using opposite Medco Holdings and COL Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medco Holdings position performs unexpectedly, COL Financial 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 COL Financial will offset losses from the drop in COL Financial's long position.| Medco Holdings vs. Apex Mining Co | Medco Holdings vs. Atlas Consolidated Mining | Medco Holdings vs. Integrated Micro Electronics | Medco Holdings vs. Semirara Mining Corp |
| COL Financial vs. Bright Kindle Resources | COL Financial vs. Allhome Corp | COL Financial vs. Jollibee Foods Corp | COL Financial vs. LFM Properties Corp |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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