Correlation Between Microsoft and UNITED URBAN
Can any of the company-specific risk be diversified away by investing in both Microsoft and UNITED URBAN 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 Microsoft and UNITED URBAN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and UNITED URBAN INV, you can compare the effects of market volatilities on Microsoft and UNITED URBAN 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 Microsoft with a short position of UNITED URBAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and UNITED URBAN.
Diversification Opportunities for Microsoft and UNITED URBAN
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and UNITED is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and UNITED URBAN INV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED URBAN INV and Microsoft 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 Microsoft are associated (or correlated) with UNITED URBAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITED URBAN INV has no effect on the direction of Microsoft i.e., Microsoft and UNITED URBAN go up and down completely randomly.
Pair Corralation between Microsoft and UNITED URBAN
Assuming the 90 days trading horizon Microsoft is expected to generate 1.19 times more return on investment than UNITED URBAN. However, Microsoft is 1.19 times more volatile than UNITED URBAN INV. It trades about 0.08 of its potential returns per unit of risk. UNITED URBAN INV is currently generating about -0.02 per unit of risk. If you would invest 22,846 in Microsoft on August 28, 2024 and sell it today you would earn a total of 16,814 from holding Microsoft or generate 73.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. UNITED URBAN INV
Performance |
| Timeline |
| Microsoft |
| UNITED URBAN INV |
Microsoft and UNITED URBAN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and UNITED URBAN
The main advantage of trading using opposite Microsoft and UNITED URBAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, UNITED URBAN 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 UNITED URBAN will offset losses from the drop in UNITED URBAN's long position.| Microsoft vs. United Airlines Holdings | Microsoft vs. JAPAN AIRLINES | Microsoft vs. G III APPAREL GROUP | Microsoft vs. LIFENET INSURANCE CO |
| UNITED URBAN vs. Apple Inc | UNITED URBAN vs. Apple Inc | UNITED URBAN vs. Apple Inc | UNITED URBAN vs. Apple Inc |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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