Correlation Between Healthcare Global and MRF

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

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

Diversification Opportunities for Healthcare Global and MRF

-0.77

Correlation Coefficient

Healthcare Global  MRF

Pay attention - limited upside

The 3 months correlation between Healthcare and MRF is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Global Enterprises and MRF Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MRF Limited and Healthcare Global 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 Healthcare Global Enterprises are associated (or correlated) with MRF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MRF Limited has no effect on the direction of Healthcare Global i.e., Healthcare Global and MRF go up and down completely randomly.

Pair Corralation between Healthcare Global and MRF

Assuming the 90 days trading horizon Healthcare Global Enterprises is expected to generate 1.74 times more return on investment than MRF. However, Healthcare Global is 1.74 times more volatile than MRF Limited. It trades about 0.24 of its potential returns per unit of risk. MRF Limited is currently generating about -0.1 per unit of risk. If you would invest  38,685  in Healthcare Global Enterprises on August 31, 2024 and sell it today you would earn a total of  11,675  from holding Healthcare Global Enterprises or generate 30.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Healthcare Global Enterprises  vs.  MRF Limited

Healthcare Global

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Healthcare Global Enterprises are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Healthcare Global exhibited solid returns over the last few months and may actually be approaching a breakup point.

MRF Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MRF Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Healthcare Global and MRF

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

The idea behind Healthcare Global Enterprises and MRF Limited 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.