Correlation Between Creades AB and MedCap AB

Can any of the company-specific risk be diversified away by investing in both Creades AB and MedCap AB 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 Creades AB and MedCap AB into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Creades AB and MedCap AB, you can compare the effects of market volatilities on Creades AB and MedCap AB 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 Creades AB with a short position of MedCap AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Creades AB and MedCap AB.

Diversification Opportunities for Creades AB and MedCap AB

0.55

Correlation Coefficient

Creades AB  MedCap AB

Very weak diversification

The 3 months correlation between Creades and MedCap is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Creades AB and MedCap AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MedCap AB and Creades AB 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 Creades AB are associated (or correlated) with MedCap AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MedCap AB has no effect on the direction of Creades AB i.e., Creades AB and MedCap AB go up and down completely randomly.

Pair Corralation between Creades AB and MedCap AB

Assuming the 90 days trading horizon Creades AB is expected to generate 5.62 times less return on investment than MedCap AB. But when comparing it to its historical volatility, Creades AB is 1.39 times less risky than MedCap AB. It trades about 0.06 of its potential returns per unit of risk. MedCap AB is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  40,500  in MedCap AB on April 24, 2025 and sell it today you would earn a total of  11,900  from holding MedCap AB or generate 29.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Creades AB  vs.  MedCap AB

Creades AB

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Creades AB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Creades AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

MedCap AB

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MedCap AB are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, MedCap AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Creades AB and MedCap AB

The main advantage of trading using opposite Creades AB and MedCap AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Creades AB position performs unexpectedly, MedCap AB 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 MedCap AB will offset losses from the drop in MedCap AB's long position.

The idea behind Creades AB and MedCap AB 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.