Correlation Between MultiPlan and Baxter International

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

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

Diversification Opportunities for MultiPlan and Baxter International

0.29

Correlation Coefficient

MultiPlan  Baxter International

Modest diversification

The 3 months correlation between MultiPlan and Baxter is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding MultiPlan and Baxter International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baxter International and MultiPlan 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 MultiPlan are associated (or correlated) with Baxter International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baxter International has no effect on the direction of MultiPlan i.e., MultiPlan and Baxter International go up and down completely randomly.

Pair Corralation between MultiPlan and Baxter International

Given the investment horizon of 90 days MultiPlan is expected to generate 4.07 times more return on investment than Baxter International. However, MultiPlan is 4.07 times more volatile than Baxter International. It trades about 0.18 of its potential returns per unit of risk. Baxter International is currently generating about 0.14 per unit of risk. If you would invest  1,826  in MultiPlan on December 2, 2024 and sell it today you would earn a total of  489.00  from holding MultiPlan or generate 26.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

MultiPlan  vs.  Baxter International

MultiPlan

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MultiPlan are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, MultiPlan displayed solid returns over the last few months and may actually be approaching a breakup point.

Baxter International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Baxter International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Baxter International is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MultiPlan and Baxter International

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

The idea behind MultiPlan and Baxter International 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.