Correlation Between Microsoft and Diversified Healthcare
Can any of the company-specific risk be diversified away by investing in both Microsoft and Diversified Healthcare 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 Diversified Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Diversified Healthcare Trust, you can compare the effects of market volatilities on Microsoft and Diversified Healthcare 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 Diversified Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Diversified Healthcare.
Diversification Opportunities for Microsoft and Diversified Healthcare
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Diversified is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Diversified Healthcare Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diversified Healthcare 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 Diversified Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diversified Healthcare has no effect on the direction of Microsoft i.e., Microsoft and Diversified Healthcare go up and down completely randomly.
Pair Corralation between Microsoft and Diversified Healthcare
Given the investment horizon of 90 days Microsoft is expected to under-perform the Diversified Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.84 times less risky than Diversified Healthcare. The stock trades about -0.03 of its potential returns per unit of risk. The Diversified Healthcare Trust is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 215.00 in Diversified Healthcare Trust on November 8, 2024 and sell it today you would earn a total of 56.00 from holding Diversified Healthcare Trust or generate 26.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Diversified Healthcare Trust
Performance |
| Timeline |
| Microsoft |
| Diversified Healthcare |
Microsoft and Diversified Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Diversified Healthcare
The main advantage of trading using opposite Microsoft and Diversified Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Diversified Healthcare 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 Diversified Healthcare will offset losses from the drop in Diversified Healthcare's long position.| Microsoft vs. Crowdstrike Holdings | Microsoft vs. Okta Inc | Microsoft vs. Cloudflare | Microsoft vs. MongoDB |
| Diversified Healthcare vs. Global Medical REIT | Diversified Healthcare vs. Healthpeak Properties | Diversified Healthcare vs. Ventas Inc | Diversified Healthcare vs. National Health Investors |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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