Correlation Between MPH Health and ZIM Integrated

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

By analyzing existing cross correlation between MPH Health Care and ZIM Integrated Shipping, you can compare the effects of market volatilities on MPH Health and ZIM Integrated 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 MPH Health with a short position of ZIM Integrated. Check out your portfolio center. Please also check ongoing floating volatility patterns of MPH Health and ZIM Integrated.

Diversification Opportunities for MPH Health and ZIM Integrated

0.15

Correlation Coefficient

MPH Health  ZIM Integrated

Average diversification

The 3 months correlation between MPH and ZIM is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding MPH Health Care and ZIM Integrated Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZIM Integrated Shipping and MPH Health 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 MPH Health Care are associated (or correlated) with ZIM Integrated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZIM Integrated Shipping has no effect on the direction of MPH Health i.e., MPH Health and ZIM Integrated go up and down completely randomly.

Pair Corralation between MPH Health and ZIM Integrated

Assuming the 90 days trading horizon MPH Health is expected to generate 4.02 times less return on investment than ZIM Integrated. But when comparing it to its historical volatility, MPH Health Care is 3.68 times less risky than ZIM Integrated. It trades about 0.02 of its potential returns per unit of risk. ZIM Integrated Shipping is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,764  in ZIM Integrated Shipping on December 20, 2024 and sell it today you would lose (19.00) from holding ZIM Integrated Shipping or give up 1.08% of portfolio value over 90 days.

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

MPH Health Care  vs.  ZIM Integrated Shipping

MPH Health Care

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MPH Health Care are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, MPH Health is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

ZIM Integrated Shipping

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ZIM Integrated Shipping are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ZIM Integrated is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MPH Health and ZIM Integrated

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

The idea behind MPH Health Care and ZIM Integrated Shipping 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.