Correlation Between Microsoft and HILTON WORLDWIDE
Can any of the company-specific risk be diversified away by investing in both Microsoft and HILTON WORLDWIDE 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 HILTON WORLDWIDE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and HILTON WORLDWIDE HOLDINGS, you can compare the effects of market volatilities on Microsoft and HILTON WORLDWIDE 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 HILTON WORLDWIDE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and HILTON WORLDWIDE.
Diversification Opportunities for Microsoft and HILTON WORLDWIDE
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microsoft and HILTON is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and HILTON WORLDWIDE HOLDINGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HILTON WORLDWIDE HOLDINGS 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 HILTON WORLDWIDE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HILTON WORLDWIDE HOLDINGS has no effect on the direction of Microsoft i.e., Microsoft and HILTON WORLDWIDE go up and down completely randomly.
Pair Corralation between Microsoft and HILTON WORLDWIDE
Assuming the 90 days trading horizon Microsoft is expected to generate 1.08 times more return on investment than HILTON WORLDWIDE. However, Microsoft is 1.08 times more volatile than HILTON WORLDWIDE HOLDINGS. It trades about 0.33 of its potential returns per unit of risk. HILTON WORLDWIDE HOLDINGS is currently generating about 0.18 per unit of risk. If you would invest 39,277 in Microsoft on September 12, 2024 and sell it today you would earn a total of 3,458 from holding Microsoft or generate 8.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. HILTON WORLDWIDE HOLDINGS
Performance |
| Timeline |
| Microsoft |
| HILTON WORLDWIDE HOLDINGS |
Microsoft and HILTON WORLDWIDE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and HILTON WORLDWIDE
The main advantage of trading using opposite Microsoft and HILTON WORLDWIDE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, HILTON WORLDWIDE 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 HILTON WORLDWIDE will offset losses from the drop in HILTON WORLDWIDE's long position.| Microsoft vs. Corsair Gaming | Microsoft vs. Altair Engineering | Microsoft vs. SYSTEMAIR AB | Microsoft vs. SMA Solar Technology |
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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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