Correlation Between Medibank Private and Mount Gibson
Can any of the company-specific risk be diversified away by investing in both Medibank Private and Mount Gibson 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 Medibank Private and Mount Gibson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Medibank Private and Mount Gibson Iron, you can compare the effects of market volatilities on Medibank Private and Mount Gibson 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 Medibank Private with a short position of Mount Gibson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medibank Private and Mount Gibson.
Diversification Opportunities for Medibank Private and Mount Gibson
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Medibank and Mount is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Medibank Private and Mount Gibson Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mount Gibson Iron and Medibank Private 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 Medibank Private are associated (or correlated) with Mount Gibson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mount Gibson Iron has no effect on the direction of Medibank Private i.e., Medibank Private and Mount Gibson go up and down completely randomly.
Pair Corralation between Medibank Private and Mount Gibson
Assuming the 90 days trading horizon Medibank Private is expected to generate 5.83 times less return on investment than Mount Gibson. But when comparing it to its historical volatility, Medibank Private is 2.31 times less risky than Mount Gibson. It trades about 0.05 of its potential returns per unit of risk. Mount Gibson Iron is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 31.00 in Mount Gibson Iron on September 13, 2024 and sell it today you would earn a total of 2.00 from holding Mount Gibson Iron or generate 6.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Medibank Private vs. Mount Gibson Iron
Performance |
| Timeline |
| Medibank Private |
| Mount Gibson Iron |
Medibank Private and Mount Gibson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Medibank Private and Mount Gibson
The main advantage of trading using opposite Medibank Private and Mount Gibson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medibank Private position performs unexpectedly, Mount Gibson 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 Mount Gibson will offset losses from the drop in Mount Gibson's long position.| Medibank Private vs. Westpac Banking | Medibank Private vs. National Australia Bank | Medibank Private vs. National Australia Bank | Medibank Private vs. National Australia Bank |
| Mount Gibson vs. Finexia Financial Group | Mount Gibson vs. Wt Financial Group | Mount Gibson vs. Dicker Data | Mount Gibson vs. Credit Clear |
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 Stocks Directory module to find actively traded stocks across global markets.
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