Correlation Between Fresenius Medical and EMPEROR ENT

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

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

Diversification Opportunities for Fresenius Medical and EMPEROR ENT

0.62

Correlation Coefficient

Fresenius Medical  EMPEROR ENT

Poor diversification

The 3 months correlation between Fresenius and EMPEROR is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Fresenius Medical Care and EMPEROR ENT HOTEL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMPEROR ENT HOTEL and Fresenius Medical 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 Fresenius Medical Care are associated (or correlated) with EMPEROR ENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMPEROR ENT HOTEL has no effect on the direction of Fresenius Medical i.e., Fresenius Medical and EMPEROR ENT go up and down completely randomly.

Pair Corralation between Fresenius Medical and EMPEROR ENT

Assuming the 90 days trading horizon Fresenius Medical Care is expected to generate 0.98 times more return on investment than EMPEROR ENT. However, Fresenius Medical Care is 1.02 times less risky than EMPEROR ENT. It trades about -0.02 of its potential returns per unit of risk. EMPEROR ENT HOTEL is currently generating about -0.05 per unit of risk. If you would invest  4,773  in Fresenius Medical Care on February 3, 2025 and sell it today you would lose (230.00) from holding Fresenius Medical Care or give up 4.82% of portfolio value over 90 days.

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

Fresenius Medical Care  vs.  EMPEROR ENT HOTEL

Fresenius Medical Care

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fresenius Medical Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Fresenius Medical is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

EMPEROR ENT HOTEL

Risk-Adjusted Performance

Very Weak

Over the last 90 days EMPEROR ENT HOTEL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Fresenius Medical and EMPEROR ENT

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

The idea behind Fresenius Medical Care and EMPEROR ENT HOTEL 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.