Correlation Between Thermo Fisher and Mitie Group

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

By analyzing existing cross correlation between Thermo Fisher Scientific and Mitie Group PLC, you can compare the effects of market volatilities on Thermo Fisher and Mitie Group 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 Thermo Fisher with a short position of Mitie Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thermo Fisher and Mitie Group.

Diversification Opportunities for Thermo Fisher and Mitie Group

0.6

Correlation Coefficient

Thermo Fisher  Mitie Group

Poor diversification

The 3 months correlation between Thermo and Mitie is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Thermo Fisher Scientific and Mitie Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitie Group PLC and Thermo Fisher 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 Thermo Fisher Scientific are associated (or correlated) with Mitie Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitie Group PLC has no effect on the direction of Thermo Fisher i.e., Thermo Fisher and Mitie Group go up and down completely randomly.

Pair Corralation between Thermo Fisher and Mitie Group

Assuming the 90 days horizon Thermo Fisher Scientific is expected to under-perform the Mitie Group. But the stock apears to be less risky and, when comparing its historical volatility, Thermo Fisher Scientific is 2.19 times less risky than Mitie Group. The stock trades about -0.01 of its potential returns per unit of risk. The Mitie Group PLC is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  115,000  in Mitie Group PLC on March 1, 2024 and sell it today you would earn a total of  18,100  from holding Mitie Group PLC or generate 15.74% return on investment over 90 days.

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

Thermo Fisher Scientific  vs.  Mitie Group PLC

Thermo Fisher Scientific

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thermo Fisher Scientific has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Thermo Fisher is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Mitie Group PLC

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mitie Group PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Mitie Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thermo Fisher and Mitie Group

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

The idea behind Thermo Fisher Scientific and Mitie Group PLC 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..