Correlation Between Canadian Utilities and Microsoft
Can any of the company-specific risk be diversified away by investing in both Canadian Utilities 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 Canadian Utilities and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Utilities Limited and Microsoft, you can compare the effects of market volatilities on Canadian Utilities 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 Canadian Utilities with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Utilities and Microsoft.
Diversification Opportunities for Canadian Utilities and Microsoft
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Canadian and Microsoft is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Canadian Utilities 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 Canadian Utilities Limited 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 Canadian Utilities i.e., Canadian Utilities and Microsoft go up and down completely randomly.
Pair Corralation between Canadian Utilities and Microsoft
Assuming the 90 days horizon Canadian Utilities is expected to generate 7.32 times less return on investment than Microsoft. But when comparing it to its historical volatility, Canadian Utilities Limited is 1.17 times less risky than Microsoft. It trades about 0.02 of its potential returns per unit of risk. Microsoft is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 21,612 in Microsoft on October 11, 2024 and sell it today you would earn a total of 19,483 from holding Microsoft or generate 90.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Utilities Limited vs. Microsoft
Performance |
| Timeline |
| Canadian Utilities |
| Microsoft |
Canadian Utilities and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Utilities and Microsoft
The main advantage of trading using opposite Canadian Utilities and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Utilities 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.| Canadian Utilities vs. Iridium Communications | Canadian Utilities vs. Chunghwa Telecom Co | Canadian Utilities vs. MidCap Financial Investment | Canadian Utilities vs. Scandinavian Tobacco Group |
| Microsoft vs. Canadian Utilities Limited | Microsoft vs. Chesapeake Utilities | Microsoft vs. Goodyear Tire Rubber | Microsoft vs. Martin Marietta Materials |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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