Correlation Between Microsoft and NEXANS ADR
Can any of the company-specific risk be diversified away by investing in both Microsoft and NEXANS ADR 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 NEXANS ADR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and NEXANS ADR EO, you can compare the effects of market volatilities on Microsoft and NEXANS ADR 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 NEXANS ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and NEXANS ADR.
Diversification Opportunities for Microsoft and NEXANS ADR
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Microsoft and NEXANS is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and NEXANS ADR EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXANS ADR EO 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 NEXANS ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXANS ADR EO has no effect on the direction of Microsoft i.e., Microsoft and NEXANS ADR go up and down completely randomly.
Pair Corralation between Microsoft and NEXANS ADR
Assuming the 90 days trading horizon Microsoft is expected to generate 0.55 times more return on investment than NEXANS ADR. However, Microsoft is 1.81 times less risky than NEXANS ADR. It trades about -0.15 of its potential returns per unit of risk. NEXANS ADR EO is currently generating about -0.16 per unit of risk. If you would invest 42,260 in Microsoft on October 8, 2024 and sell it today you would lose (1,190) from holding Microsoft or give up 2.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. NEXANS ADR EO
Performance |
| Timeline |
| Microsoft |
| NEXANS ADR EO |
Microsoft and NEXANS ADR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and NEXANS ADR
The main advantage of trading using opposite Microsoft and NEXANS ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, NEXANS ADR 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 NEXANS ADR will offset losses from the drop in NEXANS ADR's long position.| Microsoft vs. Broadcom | Microsoft vs. Southwest Airlines Co | Microsoft vs. Playa Hotels Resorts | Microsoft vs. Ross Stores |
| NEXANS ADR vs. Corsair Gaming | NEXANS ADR vs. Norwegian Air Shuttle | NEXANS ADR vs. Harmony Gold Mining | NEXANS ADR vs. SOGECLAIR SA INH |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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