Correlation Between MEDIFAST INC and IMedia Brands

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Can any of the company-specific risk be diversified away by investing in both MEDIFAST INC and IMedia Brands 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 MEDIFAST INC and IMedia Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MEDIFAST INC and IMedia Brands, you can compare the effects of market volatilities on MEDIFAST INC and IMedia Brands 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 MEDIFAST INC with a short position of IMedia Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of MEDIFAST INC and IMedia Brands.

Diversification Opportunities for MEDIFAST INC and IMedia Brands

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between MEDIFAST and IMedia is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding MEDIFAST INC and IMedia Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IMedia Brands and MEDIFAST INC 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 MEDIFAST INC are associated (or correlated) with IMedia Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IMedia Brands has no effect on the direction of MEDIFAST INC i.e., MEDIFAST INC and IMedia Brands go up and down completely randomly.

Pair Corralation between MEDIFAST INC and IMedia Brands

Considering the 90-day investment horizon MEDIFAST INC is expected to generate 0.23 times more return on investment than IMedia Brands. However, MEDIFAST INC is 4.32 times less risky than IMedia Brands. It trades about -0.09 of its potential returns per unit of risk. IMedia Brands is currently generating about -0.1 per unit of risk. If you would invest  16,572  in MEDIFAST INC on December 30, 2023 and sell it today you would lose (12,740) from holding MEDIFAST INC or give up 76.88% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy72.06%
ValuesDaily Returns

MEDIFAST INC  vs.  IMedia Brands

 Performance 
       Timeline  
MEDIFAST INC 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days MEDIFAST INC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
IMedia Brands 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days IMedia Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, IMedia Brands is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

MEDIFAST INC and IMedia Brands Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MEDIFAST INC and IMedia Brands

The main advantage of trading using opposite MEDIFAST INC and IMedia Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MEDIFAST INC position performs unexpectedly, IMedia Brands 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 IMedia Brands will offset losses from the drop in IMedia Brands' long position.
The idea behind MEDIFAST INC and IMedia Brands 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.
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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