Correlation Between Microsoft and Medical Properties
Can any of the company-specific risk be diversified away by investing in both Microsoft and Medical Properties 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 Medical Properties into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Medical Properties Trust, you can compare the effects of market volatilities on Microsoft and Medical Properties 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 Medical Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Medical Properties.
Diversification Opportunities for Microsoft and Medical Properties
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Microsoft and Medical is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Medical Properties Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Properties Trust 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 Medical Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Properties Trust has no effect on the direction of Microsoft i.e., Microsoft and Medical Properties go up and down completely randomly.
Pair Corralation between Microsoft and Medical Properties
Assuming the 90 days trading horizon Microsoft is expected to generate 0.47 times more return on investment than Medical Properties. However, Microsoft is 2.14 times less risky than Medical Properties. It trades about 0.07 of its potential returns per unit of risk. Medical Properties Trust is currently generating about -0.1 per unit of risk. If you would invest 38,708 in Microsoft on October 18, 2024 and sell it today you would earn a total of 2,772 from holding Microsoft or generate 7.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Medical Properties Trust
Performance |
| Timeline |
| Microsoft |
| Medical Properties Trust |
Microsoft and Medical Properties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Medical Properties
The main advantage of trading using opposite Microsoft and Medical Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Medical Properties 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 Medical Properties will offset losses from the drop in Medical Properties' long position.| Microsoft vs. Major Drilling Group | Microsoft vs. GALENA MINING LTD | Microsoft vs. Zijin Mining Group | Microsoft vs. ARDAGH METAL PACDL 0001 |
| Medical Properties vs. Apple Inc | Medical Properties vs. Apple Inc | Medical Properties vs. Apple Inc | Medical Properties vs. Apple Inc |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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