Correlation Between MRF and Healthcare Global

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

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

Diversification Opportunities for MRF and Healthcare Global

-0.75

Correlation Coefficient

MRF  Healthcare Global

Pay attention - limited upside

The 3 months correlation between MRF and Healthcare is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding MRF Limited and Healthcare Global Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare Global and MRF 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 MRF Limited are associated (or correlated) with Healthcare Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare Global has no effect on the direction of MRF i.e., MRF and Healthcare Global go up and down completely randomly.

Pair Corralation between MRF and Healthcare Global

Assuming the 90 days trading horizon MRF Limited is expected to under-perform the Healthcare Global. But the stock apears to be less risky and, when comparing its historical volatility, MRF Limited is 1.73 times less risky than Healthcare Global. The stock trades about -0.1 of its potential returns per unit of risk. The Healthcare Global Enterprises is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  38,685  in Healthcare Global Enterprises on September 2, 2024 and sell it today you would earn a total of  11,555  from holding Healthcare Global Enterprises or generate 29.87% return on investment over 90 days.

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

MRF Limited  vs.  Healthcare Global Enterprises

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 unfluctuating 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.

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 uncertain technical and fundamental indicators, Healthcare Global exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MRF and Healthcare Global

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

The idea behind MRF Limited and Healthcare Global Enterprises 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.