Correlation Between TomCo Energy and Medibio

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

By analyzing existing cross correlation between TomCo Energy Plc and Medibio Limited, you can compare the effects of market volatilities on TomCo Energy and Medibio 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 TomCo Energy with a short position of Medibio. Check out your portfolio center. Please also check ongoing floating volatility patterns of TomCo Energy and Medibio.

Diversification Opportunities for TomCo Energy and Medibio

0.3

Correlation Coefficient

TomCo Energy  Medibio

Weak diversification

The 3 months correlation between TomCo and Medibio is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding TomCo Energy Plc and Medibio Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medibio Limited and TomCo Energy 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 TomCo Energy Plc are associated (or correlated) with Medibio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medibio Limited has no effect on the direction of TomCo Energy i.e., TomCo Energy and Medibio go up and down completely randomly.

Pair Corralation between TomCo Energy and Medibio

Assuming the 90 days horizon TomCo Energy is expected to generate 9.53 times less return on investment than Medibio. But when comparing it to its historical volatility, TomCo Energy Plc is 5.51 times less risky than Medibio. It trades about 0.1 of its potential returns per unit of risk. Medibio Limited is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  0.21  in Medibio Limited on May 7, 2025 and sell it today you would earn a total of  2.23  from holding Medibio Limited or generate 1061.9% return on investment over 90 days.

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

TomCo Energy Plc  vs.  Medibio Limited

TomCo Energy Plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TomCo Energy Plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting technical and fundamental indicators, TomCo Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Medibio Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Medibio Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating forward indicators, Medibio reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TomCo Energy and Medibio

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

The idea behind TomCo Energy Plc and Medibio Limited 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.