Correlation Between Microsoft and Pacific Health
Can any of the company-specific risk be diversified away by investing in both Microsoft and Pacific 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 Pacific Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Pacific Health Care, you can compare the effects of market volatilities on Microsoft and Pacific 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 Pacific Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Pacific Health.
Diversification Opportunities for Microsoft and Pacific Health
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Pacific is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Pacific Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific 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 Pacific Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Health Care has no effect on the direction of Microsoft i.e., Microsoft and Pacific Health go up and down completely randomly.
Pair Corralation between Microsoft and Pacific Health
Given the investment horizon of 90 days Microsoft is expected to generate 0.48 times more return on investment than Pacific Health. However, Microsoft is 2.07 times less risky than Pacific Health. It trades about 0.19 of its potential returns per unit of risk. Pacific Health Care is currently generating about -0.04 per unit of risk. If you would invest 40,554 in Microsoft on September 1, 2024 and sell it today you would earn a total of 1,792 from holding Microsoft or generate 4.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Pacific Health Care
Performance |
| Timeline |
| Microsoft |
| Pacific Health Care |
Microsoft and Pacific Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Pacific Health
The main advantage of trading using opposite Microsoft and Pacific Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Pacific 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 Pacific Health will offset losses from the drop in Pacific Health's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Pacific Health vs. Pharma Bio Serv | Pacific Health vs. Greystone Logistics | Pacific Health vs. Table Trac | Pacific Health vs. Western Capital Resources |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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