Correlation Between Microsoft and ShotSpotter
Can any of the company-specific risk be diversified away by investing in both Microsoft and ShotSpotter 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 ShotSpotter into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and ShotSpotter, you can compare the effects of market volatilities on Microsoft and ShotSpotter 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 ShotSpotter. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and ShotSpotter.
Diversification Opportunities for Microsoft and ShotSpotter
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and ShotSpotter is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and ShotSpotter in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ShotSpotter 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 ShotSpotter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ShotSpotter has no effect on the direction of Microsoft i.e., Microsoft and ShotSpotter go up and down completely randomly.
Pair Corralation between Microsoft and ShotSpotter
Assuming the 90 days trading horizon Microsoft is expected to generate 37.8 times less return on investment than ShotSpotter. But when comparing it to its historical volatility, Microsoft is 3.27 times less risky than ShotSpotter. It trades about 0.0 of its potential returns per unit of risk. ShotSpotter is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,050 in ShotSpotter on August 27, 2024 and sell it today you would earn a total of 40.00 from holding ShotSpotter or generate 3.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. ShotSpotter
Performance |
| Timeline |
| Microsoft |
| ShotSpotter |
Microsoft and ShotSpotter Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and ShotSpotter
The main advantage of trading using opposite Microsoft and ShotSpotter positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, ShotSpotter 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 ShotSpotter will offset losses from the drop in ShotSpotter's long position.| Microsoft vs. ALBIS LEASING AG | Microsoft vs. Sabra Health Care | Microsoft vs. National Health Investors | Microsoft vs. QBE Insurance Group |
| ShotSpotter vs. Apple Inc | ShotSpotter vs. Apple Inc | ShotSpotter vs. Apple Inc | ShotSpotter 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
Other Complementary Tools
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum |