Correlation Between Medco Holdings and First Abacus
Can any of the company-specific risk be diversified away by investing in both Medco Holdings and First Abacus 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 First Abacus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Medco Holdings and First Abacus Financial, you can compare the effects of market volatilities on Medco Holdings and First Abacus 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 First Abacus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medco Holdings and First Abacus.
Diversification Opportunities for Medco Holdings and First Abacus
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Medco and First is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Medco Holdings and First Abacus Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Abacus Financial 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 First Abacus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Abacus Financial has no effect on the direction of Medco Holdings i.e., Medco Holdings and First Abacus go up and down completely randomly.
Pair Corralation between Medco Holdings and First Abacus
Assuming the 90 days trading horizon Medco Holdings is expected to generate 2.32 times more return on investment than First Abacus. However, Medco Holdings is 2.32 times more volatile than First Abacus Financial. It trades about 0.07 of its potential returns per unit of risk. First Abacus Financial is currently generating about 0.03 per unit of risk. If you would invest 8.60 in Medco Holdings on September 1, 2024 and sell it today you would earn a total of 3.40 from holding Medco Holdings or generate 39.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 33.08% |
| Values | Daily Returns |
Medco Holdings vs. First Abacus Financial
Performance |
| Timeline |
| Medco Holdings |
| First Abacus Financial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Medco Holdings and First Abacus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Medco Holdings and First Abacus
The main advantage of trading using opposite Medco Holdings and First Abacus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medco Holdings position performs unexpectedly, First Abacus 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 First Abacus will offset losses from the drop in First Abacus' long position.| Medco Holdings vs. Bright Kindle Resources | Medco Holdings vs. Allhome Corp | Medco Holdings vs. LFM Properties Corp | Medco Holdings vs. Altus Property Ventures |
| First Abacus vs. Bright Kindle Resources | First Abacus vs. Allhome Corp | First Abacus vs. LFM Properties Corp | First Abacus vs. Altus Property Ventures |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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