Correlation Between Microsoft and Vossloh AG
Can any of the company-specific risk be diversified away by investing in both Microsoft and Vossloh AG 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 Vossloh AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Vossloh AG, you can compare the effects of market volatilities on Microsoft and Vossloh AG 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 Vossloh AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Vossloh AG.
Diversification Opportunities for Microsoft and Vossloh AG
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Microsoft and Vossloh is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Vossloh AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vossloh AG 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 Vossloh AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vossloh AG has no effect on the direction of Microsoft i.e., Microsoft and Vossloh AG go up and down completely randomly.
Pair Corralation between Microsoft and Vossloh AG
Assuming the 90 days trading horizon Microsoft is expected to generate 1.19 times more return on investment than Vossloh AG. However, Microsoft is 1.19 times more volatile than Vossloh AG. It trades about 0.08 of its potential returns per unit of risk. Vossloh AG is currently generating about 0.02 per unit of risk. If you would invest 24,043 in Microsoft on September 4, 2024 and sell it today you would earn a total of 16,997 from holding Microsoft or generate 70.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Microsoft vs. Vossloh AG
Performance |
| Timeline |
| Microsoft |
| Vossloh AG |
Microsoft and Vossloh AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Vossloh AG
The main advantage of trading using opposite Microsoft and Vossloh AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Vossloh AG 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 Vossloh AG will offset losses from the drop in Vossloh AG's long position.| Microsoft vs. FAST RETAIL ADR | Microsoft vs. Liberty Broadband | Microsoft vs. TITANIUM TRANSPORTGROUP | Microsoft vs. Marie Brizard Wine |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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