Correlation Between Microsoft and Nisshinbo Holdings
Can any of the company-specific risk be diversified away by investing in both Microsoft and Nisshinbo Holdings 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 Nisshinbo Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Nisshinbo Holdings, you can compare the effects of market volatilities on Microsoft and Nisshinbo Holdings 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 Nisshinbo Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Nisshinbo Holdings.
Diversification Opportunities for Microsoft and Nisshinbo Holdings
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Microsoft and Nisshinbo is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Nisshinbo Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nisshinbo Holdings 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 Nisshinbo Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nisshinbo Holdings has no effect on the direction of Microsoft i.e., Microsoft and Nisshinbo Holdings go up and down completely randomly.
Pair Corralation between Microsoft and Nisshinbo Holdings
Assuming the 90 days trading horizon Microsoft is expected to under-perform the Nisshinbo Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.55 times less risky than Nisshinbo Holdings. The stock trades about -0.1 of its potential returns per unit of risk. The Nisshinbo Holdings is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 515.00 in Nisshinbo Holdings on October 23, 2024 and sell it today you would earn a total of 15.00 from holding Nisshinbo Holdings or generate 2.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Nisshinbo Holdings
Performance |
| Timeline |
| Microsoft |
| Nisshinbo Holdings |
Microsoft and Nisshinbo Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Nisshinbo Holdings
The main advantage of trading using opposite Microsoft and Nisshinbo Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Nisshinbo Holdings 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 Nisshinbo Holdings will offset losses from the drop in Nisshinbo Holdings' long position.| Microsoft vs. SPORTING | Microsoft vs. PARKEN Sport Entertainment | Microsoft vs. USWE SPORTS AB | Microsoft vs. Fukuyama Transporting Co |
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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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