Correlation Between Microsoft and VITEC SOFTWARE
Can any of the company-specific risk be diversified away by investing in both Microsoft and VITEC SOFTWARE 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 VITEC SOFTWARE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and VITEC SOFTWARE GROUP, you can compare the effects of market volatilities on Microsoft and VITEC SOFTWARE 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 VITEC SOFTWARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and VITEC SOFTWARE.
Diversification Opportunities for Microsoft and VITEC SOFTWARE
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Microsoft and VITEC is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and VITEC SOFTWARE GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VITEC SOFTWARE GROUP 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 VITEC SOFTWARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VITEC SOFTWARE GROUP has no effect on the direction of Microsoft i.e., Microsoft and VITEC SOFTWARE go up and down completely randomly.
Pair Corralation between Microsoft and VITEC SOFTWARE
Assuming the 90 days trading horizon Microsoft is expected to generate 0.62 times more return on investment than VITEC SOFTWARE. However, Microsoft is 1.61 times less risky than VITEC SOFTWARE. It trades about 0.01 of its potential returns per unit of risk. VITEC SOFTWARE GROUP is currently generating about -0.04 per unit of risk. If you would invest 39,752 in Microsoft on August 25, 2024 and sell it today you would earn a total of 3.00 from holding Microsoft or generate 0.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.24% |
| Values | Daily Returns |
Microsoft vs. VITEC SOFTWARE GROUP
Performance |
| Timeline |
| Microsoft |
| VITEC SOFTWARE GROUP |
Microsoft and VITEC SOFTWARE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and VITEC SOFTWARE
The main advantage of trading using opposite Microsoft and VITEC SOFTWARE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, VITEC SOFTWARE 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 VITEC SOFTWARE will offset losses from the drop in VITEC SOFTWARE's long position.| Microsoft vs. HYDROFARM HLD GRP | Microsoft vs. Hanison Construction Holdings | Microsoft vs. LION ONE METALS | Microsoft vs. WIMFARM SA EO |
| VITEC SOFTWARE vs. Apple Inc | VITEC SOFTWARE vs. Apple Inc | VITEC SOFTWARE vs. Apple Inc | VITEC SOFTWARE 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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