Correlation Between Microsoft and PENN NATL
Can any of the company-specific risk be diversified away by investing in both Microsoft and PENN NATL 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 PENN NATL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and PENN NATL GAMING, you can compare the effects of market volatilities on Microsoft and PENN NATL 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 PENN NATL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and PENN NATL.
Diversification Opportunities for Microsoft and PENN NATL
Excellent diversification
The 3 months correlation between Microsoft and PENN is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and PENN NATL GAMING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PENN NATL GAMING 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 PENN NATL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PENN NATL GAMING has no effect on the direction of Microsoft i.e., Microsoft and PENN NATL go up and down completely randomly.
Pair Corralation between Microsoft and PENN NATL
Assuming the 90 days trading horizon Microsoft is expected to generate 10.48 times less return on investment than PENN NATL. But when comparing it to its historical volatility, Microsoft is 2.06 times less risky than PENN NATL. It trades about 0.01 of its potential returns per unit of risk. PENN NATL GAMING is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,598 in PENN NATL GAMING on November 28, 2024 and sell it today you would earn a total of 397.00 from holding PENN NATL GAMING or generate 24.84% 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. PENN NATL GAMING
Performance |
| Timeline |
| Microsoft |
| PENN NATL GAMING |
Microsoft and PENN NATL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and PENN NATL
The main advantage of trading using opposite Microsoft and PENN NATL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, PENN NATL 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 PENN NATL will offset losses from the drop in PENN NATL's long position.| Microsoft vs. NTT DATA | Microsoft vs. Northern Data AG | Microsoft vs. Gaming and Leisure | Microsoft vs. Playa Hotels Resorts |
| PENN NATL vs. Casio Computer CoLtd | PENN NATL vs. China Communications Construction | PENN NATL vs. VARIOUS EATERIES LS | PENN NATL vs. Singapore Telecommunications Limited |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
Other Complementary Tools
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device |