Correlation Between MEDIFAST INC and Frontdoor

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

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

Diversification Opportunities for MEDIFAST INC and Frontdoor

0.84

Correlation Coefficient

MEDIFAST INC  Frontdoor

Very poor diversification

The 3 months correlation between MEDIFAST and Frontdoor is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding MEDIFAST INC and Frontdoor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontdoor 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 Frontdoor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontdoor has no effect on the direction of MEDIFAST INC i.e., MEDIFAST INC and Frontdoor go up and down completely randomly.

Pair Corralation between MEDIFAST INC and Frontdoor

Considering the 90-day investment horizon MEDIFAST INC is expected to under-perform the Frontdoor. In addition to that, MEDIFAST INC is 1.26 times more volatile than Frontdoor. It trades about -0.1 of its total potential returns per unit of risk. Frontdoor is currently generating about 0.02 per unit of volatility. If you would invest  2,684  in Frontdoor on January 26, 2024 and sell it today you would earn a total of  408.00  from holding Frontdoor or generate 15.2% return on investment over 90 days.

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

MEDIFAST INC  vs.  Frontdoor

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.

Frontdoor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Frontdoor has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with MEDIFAST INC and Frontdoor

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

The idea behind MEDIFAST INC and Frontdoor 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.