Correlation Between Medical Facilities and Information Services

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

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

Diversification Opportunities for Medical Facilities and Information Services

0.38

Correlation Coefficient

Medical Facilities  Information Services

Weak diversification

The 3 months correlation between Medical and Information is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Medical Facilities and Information Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Services 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 Information Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Services has no effect on the direction of Medical Facilities i.e., Medical Facilities and Information Services go up and down completely randomly.

Pair Corralation between Medical Facilities and Information Services

Assuming the 90 days horizon Medical Facilities is expected to under-perform the Information Services. But the stock apears to be less risky and, when comparing its historical volatility, Medical Facilities is 1.3 times less risky than Information Services. The stock trades about -0.02 of its potential returns per unit of risk. The Information Services is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,701  in Information Services on May 2, 2025 and sell it today you would earn a total of  499.00  from holding Information Services or generate 18.47% return on investment over 90 days.

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

Medical Facilities  vs.  Information Services

Medical Facilities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Medical Facilities has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Information Services

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Information Services are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Information Services displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Medical Facilities and Information Services

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

The idea behind Medical Facilities and Information Services 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.