Correlation Between Worldwide Healthcare and Mitie Group
Can any of the company-specific risk be diversified away by investing in both Worldwide Healthcare and Mitie Group 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 Worldwide Healthcare and Mitie Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Worldwide Healthcare Trust and Mitie Group PLC, you can compare the effects of market volatilities on Worldwide Healthcare and Mitie Group 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 Worldwide Healthcare with a short position of Mitie Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Worldwide Healthcare and Mitie Group.
Diversification Opportunities for Worldwide Healthcare and Mitie Group
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Worldwide and Mitie is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Worldwide Healthcare Trust and Mitie Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitie Group PLC and Worldwide Healthcare 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 Worldwide Healthcare Trust are associated (or correlated) with Mitie Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitie Group PLC has no effect on the direction of Worldwide Healthcare i.e., Worldwide Healthcare and Mitie Group go up and down completely randomly.
Pair Corralation between Worldwide Healthcare and Mitie Group
Assuming the 90 days trading horizon Worldwide Healthcare Trust is expected to under-perform the Mitie Group. But the stock apears to be less risky and, when comparing its historical volatility, Worldwide Healthcare Trust is 1.43 times less risky than Mitie Group. The stock trades about -0.21 of its potential returns per unit of risk. The Mitie Group PLC is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 11,060 in Mitie Group PLC on September 12, 2024 and sell it today you would lose (80.00) from holding Mitie Group PLC or give up 0.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Worldwide Healthcare Trust vs. Mitie Group PLC
Performance |
| Timeline |
| Worldwide Healthcare |
| Mitie Group PLC |
Worldwide Healthcare and Mitie Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Worldwide Healthcare and Mitie Group
The main advantage of trading using opposite Worldwide Healthcare and Mitie Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Worldwide Healthcare position performs unexpectedly, Mitie Group 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 Mitie Group will offset losses from the drop in Mitie Group's long position.| Worldwide Healthcare vs. Westlake Chemical Corp | Worldwide Healthcare vs. American Homes 4 | Worldwide Healthcare vs. International Consolidated Airlines | Worldwide Healthcare vs. Arrow Electronics |
| Mitie Group vs. United Utilities Group | Mitie Group vs. Ecclesiastical Insurance Office | Mitie Group vs. Zurich Insurance Group | Mitie Group vs. Roebuck Food Group |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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