Correlation Between Microsoft and Henry Schein

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

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

Diversification Opportunities for Microsoft and Henry Schein

0.13

Correlation Coefficient

Microsoft  Henry Schein

Average diversification

The 3 months correlation between Microsoft and Henry is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Henry Schein in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henry Schein and Microsoft 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 Microsoft are associated (or correlated) with Henry Schein. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henry Schein has no effect on the direction of Microsoft i.e., Microsoft and Henry Schein go up and down completely randomly.

Pair Corralation between Microsoft and Henry Schein

Given the investment horizon of 90 days Microsoft is expected to generate 2.24 times less return on investment than Henry Schein. But when comparing it to its historical volatility, Microsoft is 1.36 times less risky than Henry Schein. It trades about 0.05 of its potential returns per unit of risk. Henry Schein is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  7,046  in Henry Schein on September 3, 2024 and sell it today you would earn a total of  604.00  from holding Henry Schein or generate 8.57% return on investment over 90 days.

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

Microsoft  vs.  Henry Schein

Microsoft

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Henry Schein

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Henry Schein are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent forward indicators, Henry Schein may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Microsoft and Henry Schein

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

The idea behind Microsoft and Henry Schein 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.