Correlation Between MEDIFAST INC and Carriage Services

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

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

Diversification Opportunities for MEDIFAST INC and Carriage Services

-0.26

Correlation Coefficient

MEDIFAST INC  Carriage Services

Very good diversification

The 3 months correlation between MEDIFAST and Carriage is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding MEDIFAST INC and Carriage Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carriage Services 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 Carriage Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carriage Services has no effect on the direction of MEDIFAST INC i.e., MEDIFAST INC and Carriage Services go up and down completely randomly.

Pair Corralation between MEDIFAST INC and Carriage Services

Considering the 90-day investment horizon MEDIFAST INC is expected to under-perform the Carriage Services. In addition to that, MEDIFAST INC is 1.68 times more volatile than Carriage Services. It trades about -0.21 of its total potential returns per unit of risk. Carriage Services is currently generating about 0.02 per unit of volatility. If you would invest  2,520  in Carriage Services on January 26, 2024 and sell it today you would earn a total of  22.00  from holding Carriage Services or generate 0.87% return on investment over 90 days.

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

MEDIFAST INC  vs.  Carriage Services

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 uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Carriage Services

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Carriage Services are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Carriage Services is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with MEDIFAST INC and Carriage Services

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

The idea behind MEDIFAST INC and Carriage 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 Stocks Directory module to find actively traded stocks across global markets.