Correlation Between Microsoft and Neinor Homes
Can any of the company-specific risk be diversified away by investing in both Microsoft and Neinor Homes 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 Neinor Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Neinor Homes SA, you can compare the effects of market volatilities on Microsoft and Neinor Homes 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 Neinor Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Neinor Homes.
Diversification Opportunities for Microsoft and Neinor Homes
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microsoft and Neinor is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Neinor Homes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neinor Homes SA 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 Neinor Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neinor Homes SA has no effect on the direction of Microsoft i.e., Microsoft and Neinor Homes go up and down completely randomly.
Pair Corralation between Microsoft and Neinor Homes
Assuming the 90 days trading horizon Microsoft is expected to generate 1.44 times more return on investment than Neinor Homes. However, Microsoft is 1.44 times more volatile than Neinor Homes SA. It trades about 0.07 of its potential returns per unit of risk. Neinor Homes SA is currently generating about 0.01 per unit of risk. If you would invest 39,581 in Microsoft on August 29, 2024 and sell it today you would earn a total of 1,019 from holding Microsoft or generate 2.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Neinor Homes SA
Performance |
| Timeline |
| Microsoft |
| Neinor Homes SA |
Microsoft and Neinor Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Neinor Homes
The main advantage of trading using opposite Microsoft and Neinor Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Neinor Homes 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 Neinor Homes will offset losses from the drop in Neinor Homes' long position.| Microsoft vs. Pentair plc | Microsoft vs. NORWEGIAN AIR SHUT | Microsoft vs. GEAR4MUSIC LS 10 | Microsoft vs. Fair Isaac Corp |
| Neinor Homes vs. Apple Inc | Neinor Homes vs. Apple Inc | Neinor Homes vs. Apple Inc | Neinor Homes 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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