Correlation Between SHIP HEALTHCARE and Microsoft

Can any of the company-specific risk be diversified away by investing in both SHIP HEALTHCARE and Microsoft 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 SHIP HEALTHCARE and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SHIP HEALTHCARE HLDGINC and Microsoft, you can compare the effects of market volatilities on SHIP HEALTHCARE and Microsoft 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 SHIP HEALTHCARE with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of SHIP HEALTHCARE and Microsoft.

Diversification Opportunities for SHIP HEALTHCARE and Microsoft

-0.36

Correlation Coefficient

SHIP HEALTHCARE  Microsoft

Very good diversification

The 3 months correlation between SHIP and Microsoft is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding SHIP HEALTHCARE HLDGINC and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and SHIP 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 SHIP HEALTHCARE HLDGINC are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of SHIP HEALTHCARE i.e., SHIP HEALTHCARE and Microsoft go up and down completely randomly.

Pair Corralation between SHIP HEALTHCARE and Microsoft

Assuming the 90 days horizon SHIP HEALTHCARE is expected to generate 1.96 times less return on investment than Microsoft. But when comparing it to its historical volatility, SHIP HEALTHCARE HLDGINC is 1.0 times less risky than Microsoft. It trades about 0.05 of its potential returns per unit of risk. Microsoft is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  39,362  in Microsoft on September 19, 2024 and sell it today you would earn a total of  3,878  from holding Microsoft or generate 9.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

SHIP HEALTHCARE HLDGINC  vs.  Microsoft

SHIP HEALTHCARE HLDGINC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SHIP HEALTHCARE HLDGINC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, SHIP HEALTHCARE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Microsoft

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SHIP HEALTHCARE and Microsoft

The main advantage of trading using opposite SHIP HEALTHCARE and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SHIP HEALTHCARE position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.

The idea behind SHIP HEALTHCARE HLDGINC and Microsoft pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.