Correlation Between Microsoft and Greencoat
Can any of the company-specific risk be diversified away by investing in both Microsoft and Greencoat 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 Greencoat into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Greencoat UK Wind, you can compare the effects of market volatilities on Microsoft and Greencoat 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 Greencoat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Greencoat.
Diversification Opportunities for Microsoft and Greencoat
Excellent diversification
The 3 months correlation between Microsoft and Greencoat is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Greencoat UK Wind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greencoat UK Wind 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 Greencoat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greencoat UK Wind has no effect on the direction of Microsoft i.e., Microsoft and Greencoat go up and down completely randomly.
Pair Corralation between Microsoft and Greencoat
Assuming the 90 days trading horizon Microsoft is expected to generate 0.5 times more return on investment than Greencoat. However, Microsoft is 1.99 times less risky than Greencoat. It trades about 0.08 of its potential returns per unit of risk. Greencoat UK Wind is currently generating about 0.01 per unit of risk. If you would invest 23,582 in Microsoft on September 3, 2024 and sell it today you would earn a total of 16,408 from holding Microsoft or generate 69.58% 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. Greencoat UK Wind
Performance |
| Timeline |
| Microsoft |
| Greencoat UK Wind |
Microsoft and Greencoat Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Greencoat
The main advantage of trading using opposite Microsoft and Greencoat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Greencoat 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 Greencoat will offset losses from the drop in Greencoat's long position.| Microsoft vs. ATRYS HEALTH SA | Microsoft vs. CHINA TONTINE WINES | Microsoft vs. Cardinal Health | Microsoft vs. National Health Investors |
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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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