Correlation Between Microsoft and DOLLAR TREE
Can any of the company-specific risk be diversified away by investing in both Microsoft and DOLLAR TREE 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 DOLLAR TREE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and DOLLAR TREE, you can compare the effects of market volatilities on Microsoft and DOLLAR TREE 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 DOLLAR TREE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and DOLLAR TREE.
Diversification Opportunities for Microsoft and DOLLAR TREE
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and DOLLAR is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and DOLLAR TREE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOLLAR TREE 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 DOLLAR TREE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOLLAR TREE has no effect on the direction of Microsoft i.e., Microsoft and DOLLAR TREE go up and down completely randomly.
Pair Corralation between Microsoft and DOLLAR TREE
Assuming the 90 days trading horizon Microsoft is expected to generate 1.94 times less return on investment than DOLLAR TREE. But when comparing it to its historical volatility, Microsoft is 1.64 times less risky than DOLLAR TREE. It trades about 0.04 of its potential returns per unit of risk. DOLLAR TREE is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 6,106 in DOLLAR TREE on August 25, 2024 and sell it today you would earn a total of 164.00 from holding DOLLAR TREE or generate 2.69% 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. DOLLAR TREE
Performance |
| Timeline |
| Microsoft |
| DOLLAR TREE |
Microsoft and DOLLAR TREE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and DOLLAR TREE
The main advantage of trading using opposite Microsoft and DOLLAR TREE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, DOLLAR TREE 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 DOLLAR TREE will offset losses from the drop in DOLLAR TREE's long position.| Microsoft vs. PARKEN Sport Entertainment | Microsoft vs. WisdomTree Investments | Microsoft vs. AOYAMA TRADING | Microsoft vs. SEI INVESTMENTS |
| DOLLAR TREE vs. Goodyear Tire Rubber | DOLLAR TREE vs. APPLIED MATERIALS | DOLLAR TREE vs. National Health Investors | DOLLAR TREE vs. Bumrungrad Hospital Public |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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