Correlation Between MPH Health and Koninklijke Philips

Can any of the company-specific risk be diversified away by investing in both MPH Health and Koninklijke Philips 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 Koninklijke Philips 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 Koninklijke Philips NV, you can compare the effects of market volatilities on MPH Health and Koninklijke Philips 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 Koninklijke Philips. Check out your portfolio center. Please also check ongoing floating volatility patterns of MPH Health and Koninklijke Philips.

Diversification Opportunities for MPH Health and Koninklijke Philips

0.53

Correlation Coefficient

MPH Health  Koninklijke Philips

Very weak diversification

The 3 months correlation between MPH and Koninklijke is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding MPH Health Care and Koninklijke Philips NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koninklijke Philips 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 Koninklijke Philips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koninklijke Philips has no effect on the direction of MPH Health i.e., MPH Health and Koninklijke Philips go up and down completely randomly.

Pair Corralation between MPH Health and Koninklijke Philips

Assuming the 90 days trading horizon MPH Health Care is expected to generate 0.79 times more return on investment than Koninklijke Philips. However, MPH Health Care is 1.26 times less risky than Koninklijke Philips. It trades about -0.03 of its potential returns per unit of risk. Koninklijke Philips NV is currently generating about -0.13 per unit of risk. If you would invest  2,480  in MPH Health Care on October 10, 2024 and sell it today you would lose (100.00) from holding MPH Health Care or give up 4.03% of portfolio value over 90 days.

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

MPH Health Care  vs.  Koninklijke Philips NV

MPH Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MPH Health Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, MPH Health is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Koninklijke Philips

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Koninklijke Philips NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with MPH Health and Koninklijke Philips

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

The idea behind MPH Health Care and Koninklijke Philips NV 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.