Correlation Between Microsoft and Theralase Technologies
Can any of the company-specific risk be diversified away by investing in both Microsoft and Theralase Technologies 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 Theralase Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Theralase Technologies, you can compare the effects of market volatilities on Microsoft and Theralase Technologies 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 Theralase Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Theralase Technologies.
Diversification Opportunities for Microsoft and Theralase Technologies
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microsoft and Theralase is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Theralase Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Theralase Technologies 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 Theralase Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Theralase Technologies has no effect on the direction of Microsoft i.e., Microsoft and Theralase Technologies go up and down completely randomly.
Pair Corralation between Microsoft and Theralase Technologies
Assuming the 90 days trading horizon Microsoft is expected to generate 1.19 times less return on investment than Theralase Technologies. But when comparing it to its historical volatility, Microsoft is 4.18 times less risky than Theralase Technologies. It trades about 0.08 of its potential returns per unit of risk. Theralase Technologies is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 21.00 in Theralase Technologies on August 27, 2024 and sell it today you would lose (3.00) from holding Theralase Technologies or give up 14.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Theralase Technologies
Performance |
| Timeline |
| Microsoft |
| Theralase Technologies |
Microsoft and Theralase Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Theralase Technologies
The main advantage of trading using opposite Microsoft and Theralase Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Theralase Technologies 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 Theralase Technologies will offset losses from the drop in Theralase Technologies' long position.| Microsoft vs. AGF Management Limited | Microsoft vs. CHINA EDUCATION GROUP | Microsoft vs. DeVry Education Group | Microsoft vs. Brockhaus Capital Management |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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