Correlation Between Austco Healthcare and MFF Capital

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

By analyzing existing cross correlation between Austco Healthcare and MFF Capital Investments, you can compare the effects of market volatilities on Austco Healthcare and MFF Capital 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 Austco Healthcare with a short position of MFF Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Austco Healthcare and MFF Capital.

Diversification Opportunities for Austco Healthcare and MFF Capital

0.28

Correlation Coefficient

Austco Healthcare  MFF Capital

Modest diversification

The 3 months correlation between Austco and MFF is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Austco Healthcare and MFF Capital Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFF Capital Investments and Austco 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 Austco Healthcare are associated (or correlated) with MFF Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFF Capital Investments has no effect on the direction of Austco Healthcare i.e., Austco Healthcare and MFF Capital go up and down completely randomly.

Pair Corralation between Austco Healthcare and MFF Capital

Assuming the 90 days trading horizon Austco Healthcare is expected to generate 1.36 times more return on investment than MFF Capital. However, Austco Healthcare is 1.36 times more volatile than MFF Capital Investments. It trades about 0.3 of its potential returns per unit of risk. MFF Capital Investments is currently generating about 0.28 per unit of risk. If you would invest  25.00  in Austco Healthcare on September 29, 2024 and sell it today you would earn a total of  3.00  from holding Austco Healthcare or generate 12.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Austco Healthcare  vs.  MFF Capital Investments

Austco Healthcare

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Austco Healthcare are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Austco Healthcare may actually be approaching a critical reversion point that can send shares even higher in January 2025.

MFF Capital Investments

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MFF Capital Investments are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, MFF Capital unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Austco Healthcare and MFF Capital

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

The idea behind Austco Healthcare and MFF Capital Investments 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.