Correlation Between Microsoft and PIAGGIO C
Can any of the company-specific risk be diversified away by investing in both Microsoft and PIAGGIO C 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 PIAGGIO C into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and PIAGGIO C, you can compare the effects of market volatilities on Microsoft and PIAGGIO C 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 PIAGGIO C. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and PIAGGIO C.
Diversification Opportunities for Microsoft and PIAGGIO C
Excellent diversification
The 3 months correlation between Microsoft and PIAGGIO is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and PIAGGIO C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIAGGIO C 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 PIAGGIO C. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIAGGIO C has no effect on the direction of Microsoft i.e., Microsoft and PIAGGIO C go up and down completely randomly.
Pair Corralation between Microsoft and PIAGGIO C
Assuming the 90 days trading horizon Microsoft is expected to generate 0.69 times more return on investment than PIAGGIO C. However, Microsoft is 1.46 times less risky than PIAGGIO C. It trades about 0.33 of its potential returns per unit of risk. PIAGGIO C is currently generating about 0.08 per unit of risk. If you would invest 39,836 in Microsoft on September 13, 2024 and sell it today you would earn a total of 3,419 from holding Microsoft or generate 8.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. PIAGGIO C
Performance |
| Timeline |
| Microsoft |
| PIAGGIO C |
Microsoft and PIAGGIO C Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and PIAGGIO C
The main advantage of trading using opposite Microsoft and PIAGGIO C positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, PIAGGIO C 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 PIAGGIO C will offset losses from the drop in PIAGGIO C's long position.| Microsoft vs. AEGEAN AIRLINES | Microsoft vs. United Airlines Holdings | Microsoft vs. American Airlines Group | Microsoft vs. ECHO INVESTMENT ZY |
| PIAGGIO C vs. AVITA Medical | PIAGGIO C vs. ONWARD MEDICAL BV | PIAGGIO C vs. ADRIATIC METALS LS 013355 | PIAGGIO C vs. MeVis Medical Solutions |
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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