Correlation Between Medical Facilities and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Medical Facilities and Dow Jones 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 Medical Facilities and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Medical Facilities and Dow Jones Industrial, you can compare the effects of market volatilities on Medical Facilities and Dow Jones 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 Medical Facilities with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medical Facilities and Dow Jones.
Diversification Opportunities for Medical Facilities and Dow Jones
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Medical and Dow is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Medical Facilities and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Medical Facilities 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 Medical Facilities are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Medical Facilities i.e., Medical Facilities and Dow Jones go up and down completely randomly.
Pair Corralation between Medical Facilities and Dow Jones
Assuming the 90 days horizon Medical Facilities is expected to generate 3.58 times more return on investment than Dow Jones. However, Medical Facilities is 3.58 times more volatile than Dow Jones Industrial. It trades about 0.07 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 543.00 in Medical Facilities on August 25, 2024 and sell it today you would earn a total of 566.00 from holding Medical Facilities or generate 104.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 92.56% |
| Values | Daily Returns |
Medical Facilities vs. Dow Jones Industrial
Performance |
| Timeline |
Medical Facilities and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Medical Facilities
Pair trading matchups for Medical Facilities
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Medical Facilities and Dow Jones
The main advantage of trading using opposite Medical Facilities and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medical Facilities position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Medical Facilities vs. Jack Nathan Medical | Medical Facilities vs. Fresenius SE Co | Medical Facilities vs. Ramsay Health Care | Medical Facilities vs. Pennant Group |
| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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