Correlation Between MPLN Old and Baxter International

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

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

Diversification Opportunities for MPLN Old and Baxter International

0.73

Correlation Coefficient

MPLN Old  Baxter International

Poor diversification

The 3 months correlation between MPLN and Baxter is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding MPLN Old and Baxter International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baxter International and MPLN Old 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 MPLN Old 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 MPLN Old i.e., MPLN Old and Baxter International go up and down completely randomly.

Pair Corralation between MPLN Old and Baxter International

Given the investment horizon of 90 days MPLN Old is expected to generate 4.55 times more return on investment than Baxter International. However, MPLN Old is 4.55 times more volatile than Baxter International. It trades about 0.16 of its potential returns per unit of risk. Baxter International is currently generating about 0.16 per unit of risk. If you would invest  1,546  in MPLN Old on December 29, 2024 and sell it today you would earn a total of  769.00  from holding MPLN Old or generate 49.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	67.21%
Values	Daily Returns

MPLN Old  vs.  Baxter International

MPLN Old

Risk-Adjusted Performance

Good

Over the last 90 days MPLN Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very unfluctuating essential indicators, MPLN Old displayed solid returns over the last few months and may actually be approaching a breakup point.

Baxter International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Baxter International are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Baxter International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MPLN Old and Baxter International

The main advantage of trading using opposite MPLN Old and Baxter International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MPLN Old 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 MPLN Old 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.