Correlation Between COMMERCIAL VEHICLE and Microsoft
Can any of the company-specific risk be diversified away by investing in both COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between COMMERCIAL VEHICLE and Microsoft, you can compare the effects of market volatilities on COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of COMMERCIAL VEHICLE and Microsoft.
Diversification Opportunities for COMMERCIAL VEHICLE and Microsoft
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between COMMERCIAL and Microsoft is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding COMMERCIAL VEHICLE and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE i.e., COMMERCIAL VEHICLE and Microsoft go up and down completely randomly.
Pair Corralation between COMMERCIAL VEHICLE and Microsoft
Assuming the 90 days trading horizon COMMERCIAL VEHICLE is expected to under-perform the Microsoft. In addition to that, COMMERCIAL VEHICLE is 2.97 times more volatile than Microsoft. It trades about -0.05 of its total potential returns per unit of risk. Microsoft is currently generating about 0.28 per unit of volatility. If you would invest 40,200 in Microsoft on September 14, 2024 and sell it today you would earn a total of 3,330 from holding Microsoft or generate 8.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
COMMERCIAL VEHICLE vs. Microsoft
Performance |
| Timeline |
| COMMERCIAL VEHICLE |
| Microsoft |
COMMERCIAL VEHICLE and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with COMMERCIAL VEHICLE and Microsoft
The main advantage of trading using opposite COMMERCIAL VEHICLE and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COMMERCIAL VEHICLE 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.| COMMERCIAL VEHICLE vs. Apple Inc | COMMERCIAL VEHICLE vs. Apple Inc | COMMERCIAL VEHICLE vs. Apple Inc | COMMERCIAL VEHICLE vs. Apple Inc |
| Microsoft vs. GEAR4MUSIC LS 10 | Microsoft vs. UNIVERSAL MUSIC GROUP | Microsoft vs. Lifeway Foods | Microsoft vs. National Beverage Corp |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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