Correlation Between Microsoft and PLAYMATES TOYS
Can any of the company-specific risk be diversified away by investing in both Microsoft and PLAYMATES TOYS 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 PLAYMATES TOYS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and PLAYMATES TOYS, you can compare the effects of market volatilities on Microsoft and PLAYMATES TOYS 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 PLAYMATES TOYS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and PLAYMATES TOYS.
Diversification Opportunities for Microsoft and PLAYMATES TOYS
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and PLAYMATES is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and PLAYMATES TOYS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLAYMATES TOYS 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 PLAYMATES TOYS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLAYMATES TOYS has no effect on the direction of Microsoft i.e., Microsoft and PLAYMATES TOYS go up and down completely randomly.
Pair Corralation between Microsoft and PLAYMATES TOYS
Assuming the 90 days trading horizon Microsoft is expected to under-perform the PLAYMATES TOYS. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 4.82 times less risky than PLAYMATES TOYS. The stock trades about -0.01 of its potential returns per unit of risk. The PLAYMATES TOYS is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4.81 in PLAYMATES TOYS on September 30, 2024 and sell it today you would earn a total of 2.34 from holding PLAYMATES TOYS or generate 48.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. PLAYMATES TOYS
Performance |
| Timeline |
| Microsoft |
| PLAYMATES TOYS |
Microsoft and PLAYMATES TOYS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and PLAYMATES TOYS
The main advantage of trading using opposite Microsoft and PLAYMATES TOYS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, PLAYMATES TOYS 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 PLAYMATES TOYS will offset losses from the drop in PLAYMATES TOYS's long position.| Microsoft vs. PLAYTIKA HOLDING DL 01 | Microsoft vs. Live Nation Entertainment | Microsoft vs. WT OFFSHORE | Microsoft vs. Prosiebensat 1 Media |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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