Correlation Between Microsoft and COMMERCIAL VEHICLE
Can any of the company-specific risk be diversified away by investing in both Microsoft and COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and COMMERCIAL VEHICLE, you can compare the effects of market volatilities on Microsoft and COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and COMMERCIAL VEHICLE.
Diversification Opportunities for Microsoft and COMMERCIAL VEHICLE
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and COMMERCIAL is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and COMMERCIAL VEHICLE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMMERCIAL VEHICLE has no effect on the direction of Microsoft i.e., Microsoft and COMMERCIAL VEHICLE go up and down completely randomly.
Pair Corralation between Microsoft and COMMERCIAL VEHICLE
Assuming the 90 days trading horizon Microsoft is expected to generate 0.37 times more return on investment than COMMERCIAL VEHICLE. However, Microsoft is 2.72 times less risky than COMMERCIAL VEHICLE. It trades about 0.03 of its potential returns per unit of risk. COMMERCIAL VEHICLE is currently generating about -0.1 per unit of risk. If you would invest 36,838 in Microsoft on August 28, 2024 and sell it today you would earn a total of 2,827 from holding Microsoft or generate 7.67% 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. COMMERCIAL VEHICLE
Performance |
| Timeline |
| Microsoft |
| COMMERCIAL VEHICLE |
Microsoft and COMMERCIAL VEHICLE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and COMMERCIAL VEHICLE
The main advantage of trading using opposite Microsoft and COMMERCIAL VEHICLE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE will offset losses from the drop in COMMERCIAL VEHICLE's long position.| Microsoft vs. VIRGIN WINES UK | Microsoft vs. Fast Retailing Co | Microsoft vs. Salesforce | Microsoft vs. Infrastrutture Wireless Italiane |
| COMMERCIAL VEHICLE vs. ATRESMEDIA | COMMERCIAL VEHICLE vs. Entravision Communications | COMMERCIAL VEHICLE vs. PARKEN Sport Entertainment | COMMERCIAL VEHICLE vs. Consolidated Communications Holdings |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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