Correlation Between Microsoft and Evolent Health
Can any of the company-specific risk be diversified away by investing in both Microsoft and Evolent 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 Evolent Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Evolent Health, you can compare the effects of market volatilities on Microsoft and Evolent 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 Evolent Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Evolent Health.
Diversification Opportunities for Microsoft and Evolent Health
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Evolent is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Evolent Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolent Health 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 Evolent Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolent Health has no effect on the direction of Microsoft i.e., Microsoft and Evolent Health go up and down completely randomly.
Pair Corralation between Microsoft and Evolent Health
Given the investment horizon of 90 days Microsoft is expected to generate 0.32 times more return on investment than Evolent Health. However, Microsoft is 3.15 times less risky than Evolent Health. It trades about 0.06 of its potential returns per unit of risk. Evolent Health is currently generating about -0.04 per unit of risk. If you would invest 32,151 in Microsoft on August 31, 2024 and sell it today you would earn a total of 10,195 from holding Microsoft or generate 31.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Evolent Health
Performance |
| Timeline |
| Microsoft |
| Evolent Health |
Microsoft and Evolent Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Evolent Health
The main advantage of trading using opposite Microsoft and Evolent Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Evolent 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 Evolent Health will offset losses from the drop in Evolent Health's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Evolent Health vs. CareMax | Evolent Health vs. Certara | Evolent Health vs. Definitive Healthcare Corp | Evolent Health vs. National Research Corp |
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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