Correlation Between CATLIN GROUP and Microsoft
Can any of the company-specific risk be diversified away by investing in both CATLIN GROUP 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 CATLIN GROUP and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CATLIN GROUP and Microsoft, you can compare the effects of market volatilities on CATLIN GROUP 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 CATLIN GROUP with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of CATLIN GROUP and Microsoft.
Diversification Opportunities for CATLIN GROUP and Microsoft
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between CATLIN and Microsoft is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding CATLIN GROUP and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and CATLIN GROUP 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 CATLIN GROUP 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 CATLIN GROUP i.e., CATLIN GROUP and Microsoft go up and down completely randomly.
Pair Corralation between CATLIN GROUP and Microsoft
Assuming the 90 days trading horizon CATLIN GROUP is expected to under-perform the Microsoft. But the stock apears to be less risky and, when comparing its historical volatility, CATLIN GROUP is 3.93 times less risky than Microsoft. The stock trades about -0.14 of its potential returns per unit of risk. The Microsoft is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 40,770 in Microsoft on September 4, 2024 and sell it today you would earn a total of 2,580 from holding Microsoft or generate 6.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
CATLIN GROUP vs. Microsoft
Performance |
| Timeline |
| CATLIN GROUP |
| Microsoft |
CATLIN GROUP and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CATLIN GROUP and Microsoft
The main advantage of trading using opposite CATLIN GROUP and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CATLIN GROUP 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.| CATLIN GROUP vs. Tungsten West PLC | CATLIN GROUP vs. Versarien PLC | CATLIN GROUP vs. Quantum Blockchain Technologies | CATLIN GROUP vs. Malvern International |
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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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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