Correlation Between SWISS WATER and Microsoft
Can any of the company-specific risk be diversified away by investing in both SWISS WATER and Microsoft 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 SWISS WATER and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SWISS WATER DECAFFCOFFEE and Microsoft, you can compare the effects of market volatilities on SWISS WATER and Microsoft 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 SWISS WATER with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of SWISS WATER and Microsoft.
Diversification Opportunities for SWISS WATER and Microsoft
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SWISS and Microsoft is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding SWISS WATER DECAFFCOFFEE and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and SWISS WATER 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 SWISS WATER DECAFFCOFFEE are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of SWISS WATER i.e., SWISS WATER and Microsoft go up and down completely randomly.
Pair Corralation between SWISS WATER and Microsoft
Assuming the 90 days horizon SWISS WATER DECAFFCOFFEE is expected to under-perform the Microsoft. In addition to that, SWISS WATER is 1.75 times more volatile than Microsoft. It trades about -0.07 of its total potential returns per unit of risk. Microsoft is currently generating about 0.3 per unit of volatility. If you would invest 39,433 in Microsoft on September 12, 2024 and sell it today you would earn a total of 3,287 from holding Microsoft or generate 8.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SWISS WATER DECAFFCOFFEE vs. Microsoft
Performance |
| Timeline |
| SWISS WATER DECAFFCOFFEE |
| Microsoft |
SWISS WATER and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SWISS WATER and Microsoft
The main advantage of trading using opposite SWISS WATER and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SWISS WATER position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.| SWISS WATER vs. Chongqing Machinery Electric | SWISS WATER vs. Insteel Industries | SWISS WATER vs. RELIANCE STEEL AL | SWISS WATER vs. Hitachi Construction Machinery |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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