Correlation Between Microsoft and SPANISH MTN
Can any of the company-specific risk be diversified away by investing in both Microsoft and SPANISH MTN 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 SPANISH MTN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and SPANISH MTN GLD, you can compare the effects of market volatilities on Microsoft and SPANISH MTN 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 SPANISH MTN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and SPANISH MTN.
Diversification Opportunities for Microsoft and SPANISH MTN
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and SPANISH is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SPANISH MTN GLD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPANISH MTN GLD 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 SPANISH MTN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPANISH MTN GLD has no effect on the direction of Microsoft i.e., Microsoft and SPANISH MTN go up and down completely randomly.
Pair Corralation between Microsoft and SPANISH MTN
Assuming the 90 days trading horizon Microsoft is expected to generate 17.66 times less return on investment than SPANISH MTN. But when comparing it to its historical volatility, Microsoft is 3.71 times less risky than SPANISH MTN. It trades about 0.03 of its potential returns per unit of risk. SPANISH MTN GLD is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 8.60 in SPANISH MTN GLD on August 27, 2024 and sell it today you would earn a total of 1.40 from holding SPANISH MTN GLD or generate 16.28% 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. SPANISH MTN GLD
Performance |
| Timeline |
| Microsoft |
| SPANISH MTN GLD |
Microsoft and SPANISH MTN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and SPANISH MTN
The main advantage of trading using opposite Microsoft and SPANISH MTN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, SPANISH MTN 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 SPANISH MTN will offset losses from the drop in SPANISH MTN's long position.| Microsoft vs. ELMOS SEMICONDUCTOR | Microsoft vs. Cogent Communications Holdings | Microsoft vs. Ribbon Communications | Microsoft vs. Computershare Limited |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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