Correlation Between Microsoft and TREECOM
Can any of the company-specific risk be diversified away by investing in both Microsoft and TREECOM 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 TREECOM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and TREECOM, you can compare the effects of market volatilities on Microsoft and TREECOM 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 TREECOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and TREECOM.
Diversification Opportunities for Microsoft and TREECOM
Excellent diversification
The 3 months correlation between Microsoft and TREECOM is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and TREECOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TREECOM 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 TREECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TREECOM has no effect on the direction of Microsoft i.e., Microsoft and TREECOM go up and down completely randomly.
Pair Corralation between Microsoft and TREECOM
Assuming the 90 days trading horizon Microsoft is expected to generate 0.31 times more return on investment than TREECOM. However, Microsoft is 3.22 times less risky than TREECOM. It trades about 0.31 of its potential returns per unit of risk. TREECOM is currently generating about -0.21 per unit of risk. If you would invest 39,217 in Microsoft on September 12, 2024 and sell it today you would earn a total of 3,523 from holding Microsoft or generate 8.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. TREECOM
Performance |
| Timeline |
| Microsoft |
| TREECOM |
Microsoft and TREECOM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and TREECOM
The main advantage of trading using opposite Microsoft and TREECOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, TREECOM 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 TREECOM will offset losses from the drop in TREECOM's long position.| Microsoft vs. QURATE RETAIL INC | Microsoft vs. The Trade Desk | Microsoft vs. Consolidated Communications Holdings | Microsoft vs. Internet Thailand PCL |
| TREECOM vs. DATAGROUP SE | TREECOM vs. GALENA MINING LTD | TREECOM vs. MINCO SILVER | TREECOM vs. Zijin Mining Group |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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