Correlation Between Microsoft and UNIVERSAL DISPLAY
Can any of the company-specific risk be diversified away by investing in both Microsoft and UNIVERSAL DISPLAY 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 UNIVERSAL DISPLAY into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and UNIVERSAL DISPLAY, you can compare the effects of market volatilities on Microsoft and UNIVERSAL DISPLAY 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 UNIVERSAL DISPLAY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and UNIVERSAL DISPLAY.
Diversification Opportunities for Microsoft and UNIVERSAL DISPLAY
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and UNIVERSAL is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and UNIVERSAL DISPLAY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNIVERSAL DISPLAY 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 UNIVERSAL DISPLAY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNIVERSAL DISPLAY has no effect on the direction of Microsoft i.e., Microsoft and UNIVERSAL DISPLAY go up and down completely randomly.
Pair Corralation between Microsoft and UNIVERSAL DISPLAY
Assuming the 90 days trading horizon Microsoft is expected to generate 0.63 times more return on investment than UNIVERSAL DISPLAY. However, Microsoft is 1.59 times less risky than UNIVERSAL DISPLAY. It trades about 0.09 of its potential returns per unit of risk. UNIVERSAL DISPLAY is currently generating about 0.03 per unit of risk. If you would invest 23,557 in Microsoft on October 28, 2024 and sell it today you would earn a total of 18,848 from holding Microsoft or generate 80.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. UNIVERSAL DISPLAY
Performance |
| Timeline |
| Microsoft |
| UNIVERSAL DISPLAY |
Microsoft and UNIVERSAL DISPLAY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and UNIVERSAL DISPLAY
The main advantage of trading using opposite Microsoft and UNIVERSAL DISPLAY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, UNIVERSAL DISPLAY 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 UNIVERSAL DISPLAY will offset losses from the drop in UNIVERSAL DISPLAY's long position.| Microsoft vs. PLANT VEDA FOODS | Microsoft vs. Tyson Foods | Microsoft vs. Universal Health Realty | Microsoft vs. CN MODERN DAIRY |
| UNIVERSAL DISPLAY vs. Apple Inc | UNIVERSAL DISPLAY vs. Apple Inc | UNIVERSAL DISPLAY vs. Apple Inc | UNIVERSAL DISPLAY vs. Apple Inc |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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