Correlation Between Microsoft and MPH Health
Can any of the company-specific risk be diversified away by investing in both Microsoft and MPH Health 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 Microsoft and MPH Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and MPH Health Care, you can compare the effects of market volatilities on Microsoft and MPH Health 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 Microsoft with a short position of MPH Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and MPH Health.
Diversification Opportunities for Microsoft and MPH Health
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and MPH is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and MPH Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MPH Health Care and Microsoft 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 Microsoft are associated (or correlated) with MPH Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MPH Health Care has no effect on the direction of Microsoft i.e., Microsoft and MPH Health go up and down completely randomly.
Pair Corralation between Microsoft and MPH Health
Assuming the 90 days trading horizon Microsoft is expected to under-perform the MPH Health. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.93 times less risky than MPH Health. The stock trades about -0.13 of its potential returns per unit of risk. The MPH Health Care is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 2,420 in MPH Health Care on October 11, 2024 and sell it today you would lose (40.00) from holding MPH Health Care or give up 1.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. MPH Health Care
Performance |
| Timeline |
| Microsoft |
| MPH Health Care |
Microsoft and MPH Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and MPH Health
The main advantage of trading using opposite Microsoft and MPH Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, MPH Health 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 MPH Health will offset losses from the drop in MPH Health's long position.| Microsoft vs. Singapore Telecommunications Limited | Microsoft vs. OFFICE DEPOT | Microsoft vs. Highlight Communications AG | Microsoft vs. ecotel communication ag |
| MPH Health vs. TYSON FOODS A | MPH Health vs. ADRIATIC METALS LS 013355 | MPH Health vs. Zijin Mining Group | MPH Health vs. Astral Foods Limited |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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