Correlation Between Mister Car and MEDIFAST INC

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

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

Diversification Opportunities for Mister Car and MEDIFAST INC

0.45

Correlation Coefficient

Mister Car  MEDIFAST INC

Very weak diversification

The 3 months correlation between Mister and MEDIFAST is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Mister Car Wash and MEDIFAST INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEDIFAST INC and Mister Car 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 Mister Car Wash are associated (or correlated) with MEDIFAST INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEDIFAST INC has no effect on the direction of Mister Car i.e., Mister Car and MEDIFAST INC go up and down completely randomly.

Pair Corralation between Mister Car and MEDIFAST INC

Considering the 90-day investment horizon Mister Car Wash is expected to generate 0.98 times more return on investment than MEDIFAST INC. However, Mister Car Wash is 1.02 times less risky than MEDIFAST INC. It trades about 0.14 of its potential returns per unit of risk. MEDIFAST INC is currently generating about -0.03 per unit of risk. If you would invest  640.00  in Mister Car Wash on August 19, 2024 and sell it today you would earn a total of  153.00  from holding Mister Car Wash or generate 23.91% return on investment over 90 days.

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

Mister Car Wash  vs.  MEDIFAST INC

Mister Car Wash

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mister Car Wash are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, Mister Car showed solid returns over the last few months and may actually be approaching a breakup point.

MEDIFAST INC

Risk-Adjusted Performance

0 of 100

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 rather sound technical and fundamental indicators, MEDIFAST INC is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Mister Car and MEDIFAST INC

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

The idea behind Mister Car Wash and MEDIFAST INC 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..