Correlation Between Microsoft and Westaim Corp
Can any of the company-specific risk be diversified away by investing in both Microsoft and Westaim Corp 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 Westaim Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and The Westaim Corp, you can compare the effects of market volatilities on Microsoft and Westaim Corp 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 Westaim Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Westaim Corp.
Diversification Opportunities for Microsoft and Westaim Corp
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microsoft and Westaim is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and The Westaim Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westaim Corp 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 Westaim Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westaim Corp has no effect on the direction of Microsoft i.e., Microsoft and Westaim Corp go up and down completely randomly.
Pair Corralation between Microsoft and Westaim Corp
Assuming the 90 days trading horizon Microsoft is expected to generate 1.02 times more return on investment than Westaim Corp. However, Microsoft is 1.02 times more volatile than The Westaim Corp. It trades about 0.1 of its potential returns per unit of risk. The Westaim Corp is currently generating about 0.09 per unit of risk. If you would invest 21,775 in Microsoft on October 16, 2024 and sell it today you would earn a total of 19,060 from holding Microsoft or generate 87.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Microsoft vs. The Westaim Corp
Performance |
| Timeline |
| Microsoft |
| Westaim Corp |
Microsoft and Westaim Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Westaim Corp
The main advantage of trading using opposite Microsoft and Westaim Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Westaim Corp 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 Westaim Corp will offset losses from the drop in Westaim Corp's long position.| Microsoft vs. Corsair Gaming | Microsoft vs. AGRICULTBK HADR25 YC | Microsoft vs. Altair Engineering | Microsoft vs. FORWARD AIR P |
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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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