Correlation Between Laurentian Bank and Medical Facilities

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

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

Diversification Opportunities for Laurentian Bank and Medical Facilities

0.72

Correlation Coefficient

Laurentian Bank  Medical Facilities

Poor diversification

The 3 months correlation between Laurentian and Medical is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Laurentian Bank and Medical Facilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Facilities and Laurentian Bank 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 Laurentian Bank are associated (or correlated) with Medical Facilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Facilities has no effect on the direction of Laurentian Bank i.e., Laurentian Bank and Medical Facilities go up and down completely randomly.

Pair Corralation between Laurentian Bank and Medical Facilities

Assuming the 90 days horizon Laurentian Bank is expected to under-perform the Medical Facilities. But the stock apears to be less risky and, when comparing its historical volatility, Laurentian Bank is 1.08 times less risky than Medical Facilities. The stock trades about -0.01 of its potential returns per unit of risk. The Medical Facilities is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  808.00  in Medical Facilities on April 20, 2025 and sell it today you would earn a total of  714.00  from holding Medical Facilities or generate 88.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Laurentian Bank  vs.  Medical Facilities

Laurentian Bank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Laurentian Bank are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Laurentian Bank displayed solid returns over the last few months and may actually be approaching a breakup point.

Medical Facilities

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Facilities are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Medical Facilities is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Laurentian Bank and Medical Facilities

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

The idea behind Laurentian Bank and Medical Facilities 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.