Correlation Between Microsoft and CHEMICAL INDUSTRIES
Can any of the company-specific risk be diversified away by investing in both Microsoft and CHEMICAL INDUSTRIES 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 CHEMICAL INDUSTRIES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and CHEMICAL INDUSTRIES, you can compare the effects of market volatilities on Microsoft and CHEMICAL INDUSTRIES 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 CHEMICAL INDUSTRIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and CHEMICAL INDUSTRIES.
Diversification Opportunities for Microsoft and CHEMICAL INDUSTRIES
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Microsoft and CHEMICAL is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and CHEMICAL INDUSTRIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHEMICAL INDUSTRIES 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 CHEMICAL INDUSTRIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHEMICAL INDUSTRIES has no effect on the direction of Microsoft i.e., Microsoft and CHEMICAL INDUSTRIES go up and down completely randomly.
Pair Corralation between Microsoft and CHEMICAL INDUSTRIES
If you would invest 41,010 in Microsoft on October 1, 2024 and sell it today you would earn a total of 30.00 from holding Microsoft or generate 0.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 94.44% |
| Values | Daily Returns |
Microsoft vs. CHEMICAL INDUSTRIES
Performance |
| Timeline |
| Microsoft |
| CHEMICAL INDUSTRIES |
Microsoft and CHEMICAL INDUSTRIES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and CHEMICAL INDUSTRIES
The main advantage of trading using opposite Microsoft and CHEMICAL INDUSTRIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, CHEMICAL INDUSTRIES 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 CHEMICAL INDUSTRIES will offset losses from the drop in CHEMICAL INDUSTRIES's long position.The idea behind Microsoft and CHEMICAL INDUSTRIES pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| CHEMICAL INDUSTRIES vs. VULCAN MATERIALS | CHEMICAL INDUSTRIES vs. Lifeway Foods | CHEMICAL INDUSTRIES vs. Goodyear Tire Rubber | CHEMICAL INDUSTRIES vs. Astral Foods 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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