Correlation Between USWE SPORTS and Microsoft
Can any of the company-specific risk be diversified away by investing in both USWE SPORTS 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 USWE SPORTS and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between USWE SPORTS AB and Microsoft, you can compare the effects of market volatilities on USWE SPORTS 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 USWE SPORTS with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of USWE SPORTS and Microsoft.
Diversification Opportunities for USWE SPORTS and Microsoft
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between USWE and Microsoft is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding USWE SPORTS AB and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and USWE SPORTS 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 USWE SPORTS AB 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 USWE SPORTS i.e., USWE SPORTS and Microsoft go up and down completely randomly.
Pair Corralation between USWE SPORTS and Microsoft
Assuming the 90 days horizon USWE SPORTS AB is expected to under-perform the Microsoft. In addition to that, USWE SPORTS is 2.37 times more volatile than Microsoft. It trades about -0.02 of its total potential returns per unit of risk. Microsoft is currently generating about 0.03 per unit of volatility. If you would invest 38,527 in Microsoft on September 3, 2024 and sell it today you would earn a total of 1,538 from holding Microsoft or generate 3.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
USWE SPORTS AB vs. Microsoft
Performance |
| Timeline |
| USWE SPORTS AB |
| Microsoft |
USWE SPORTS and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with USWE SPORTS and Microsoft
The main advantage of trading using opposite USWE SPORTS and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if USWE SPORTS 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.| USWE SPORTS vs. Li Ning Company | USWE SPORTS vs. SHIMANO INC UNSPADR10 | USWE SPORTS vs. Superior Plus Corp | USWE SPORTS vs. NMI Holdings |
| Microsoft vs. ePlay Digital | Microsoft vs. USWE SPORTS AB | Microsoft vs. InPlay Oil Corp | Microsoft vs. Thai Beverage Public |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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