Correlation Between Microsoft and Masterflex
Can any of the company-specific risk be diversified away by investing in both Microsoft and Masterflex 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 Masterflex into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Masterflex SE, you can compare the effects of market volatilities on Microsoft and Masterflex 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 Masterflex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Masterflex.
Diversification Opportunities for Microsoft and Masterflex
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Microsoft and Masterflex is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Masterflex SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masterflex SE 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 Masterflex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masterflex SE has no effect on the direction of Microsoft i.e., Microsoft and Masterflex go up and down completely randomly.
Pair Corralation between Microsoft and Masterflex
Assuming the 90 days trading horizon Microsoft is expected to generate 0.87 times more return on investment than Masterflex. However, Microsoft is 1.15 times less risky than Masterflex. It trades about 0.09 of its potential returns per unit of risk. Masterflex SE is currently generating about -0.17 per unit of risk. If you would invest 37,630 in Microsoft on August 29, 2024 and sell it today you would earn a total of 3,015 from holding Microsoft or generate 8.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Masterflex SE
Performance |
| Timeline |
| Microsoft |
| Masterflex SE |
Microsoft and Masterflex Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Masterflex
The main advantage of trading using opposite Microsoft and Masterflex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Masterflex 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 Masterflex will offset losses from the drop in Masterflex's long position.| Microsoft vs. EPSILON HEALTHCARE LTD | Microsoft vs. HEALTHCARE REAL A | Microsoft vs. STORE ELECTRONIC | Microsoft vs. LPKF Laser Electronics |
| Masterflex vs. AAC TECHNOLOGHLDGADR | Masterflex vs. Cars Inc | Masterflex vs. SYSTEMAIR AB | Masterflex vs. CARSALESCOM |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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