Correlation Between Microsoft and STRYKER
Can any of the company-specific risk be diversified away by investing in both Microsoft and STRYKER 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 STRYKER into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and STRYKER, you can compare the effects of market volatilities on Microsoft and STRYKER 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 STRYKER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and STRYKER.
Diversification Opportunities for Microsoft and STRYKER
Very good diversification
The 3 months correlation between Microsoft and STRYKER is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and STRYKER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRYKER 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 STRYKER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRYKER has no effect on the direction of Microsoft i.e., Microsoft and STRYKER go up and down completely randomly.
Pair Corralation between Microsoft and STRYKER
Assuming the 90 days trading horizon Microsoft is expected to under-perform the STRYKER. In addition to that, Microsoft is 1.34 times more volatile than STRYKER. It trades about -0.17 of its total potential returns per unit of risk. STRYKER is currently generating about -0.01 per unit of volatility. If you would invest 37,360 in STRYKER on November 28, 2024 and sell it today you would lose (140.00) from holding STRYKER or give up 0.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. STRYKER
Performance |
| Timeline |
| Microsoft |
| STRYKER |
Microsoft and STRYKER Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and STRYKER
The main advantage of trading using opposite Microsoft and STRYKER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, STRYKER 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 STRYKER will offset losses from the drop in STRYKER's long position.| Microsoft vs. Direct Line Insurance | Microsoft vs. United Overseas Insurance | Microsoft vs. ANTA Sports Products | Microsoft vs. DICKS Sporting Goods |
| STRYKER vs. MAVEN WIRELESS SWEDEN | STRYKER vs. Allegheny Technologies Incorporated | STRYKER vs. Firan Technology Group | STRYKER vs. GAZTRTECHNIUADR15EO01 |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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