Correlation Between Microsoft and VP Bank
Can any of the company-specific risk be diversified away by investing in both Microsoft and VP Bank 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 VP Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and VP Bank AG, you can compare the effects of market volatilities on Microsoft and VP Bank 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 VP Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and VP Bank.
Diversification Opportunities for Microsoft and VP Bank
Poor diversification
The 3 months correlation between Microsoft and 3VFN is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and VP Bank AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VP Bank AG 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 VP Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VP Bank AG has no effect on the direction of Microsoft i.e., Microsoft and VP Bank go up and down completely randomly.
Pair Corralation between Microsoft and VP Bank
Assuming the 90 days trading horizon Microsoft is expected to generate 0.94 times more return on investment than VP Bank. However, Microsoft is 1.06 times less risky than VP Bank. It trades about 0.1 of its potential returns per unit of risk. VP Bank AG is currently generating about 0.01 per unit of risk. If you would invest 22,000 in Microsoft on September 13, 2024 and sell it today you would earn a total of 20,735 from holding Microsoft or generate 94.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Microsoft vs. VP Bank AG
Performance |
| Timeline |
| Microsoft |
| VP Bank AG |
Microsoft and VP Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and VP Bank
The main advantage of trading using opposite Microsoft and VP Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, VP Bank 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 VP Bank will offset losses from the drop in VP Bank's long position.| Microsoft vs. DICKER DATA LTD | Microsoft vs. FORWARD AIR P | Microsoft vs. Altair Engineering | Microsoft vs. Fair Isaac Corp |
| VP Bank vs. Molson Coors Beverage | VP Bank vs. SCANSOURCE | VP Bank vs. Jacquet Metal Service | VP Bank vs. MCEWEN MINING INC |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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