Correlation Between Microsoft and AIR PRODCHEMICALS
Can any of the company-specific risk be diversified away by investing in both Microsoft and AIR PRODCHEMICALS 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 AIR PRODCHEMICALS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and AIR PRODCHEMICALS, you can compare the effects of market volatilities on Microsoft and AIR PRODCHEMICALS 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 AIR PRODCHEMICALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and AIR PRODCHEMICALS.
Diversification Opportunities for Microsoft and AIR PRODCHEMICALS
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microsoft and AIR is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and AIR PRODCHEMICALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIR PRODCHEMICALS 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 AIR PRODCHEMICALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIR PRODCHEMICALS has no effect on the direction of Microsoft i.e., Microsoft and AIR PRODCHEMICALS go up and down completely randomly.
Pair Corralation between Microsoft and AIR PRODCHEMICALS
Assuming the 90 days trading horizon Microsoft is expected to generate 3.2 times less return on investment than AIR PRODCHEMICALS. But when comparing it to its historical volatility, Microsoft is 1.03 times less risky than AIR PRODCHEMICALS. It trades about 0.08 of its potential returns per unit of risk. AIR PRODCHEMICALS is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 24,845 in AIR PRODCHEMICALS on August 30, 2024 and sell it today you would earn a total of 6,805 from holding AIR PRODCHEMICALS or generate 27.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. AIR PRODCHEMICALS
Performance |
| Timeline |
| Microsoft |
| AIR PRODCHEMICALS |
Microsoft and AIR PRODCHEMICALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and AIR PRODCHEMICALS
The main advantage of trading using opposite Microsoft and AIR PRODCHEMICALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, AIR PRODCHEMICALS 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 AIR PRODCHEMICALS will offset losses from the drop in AIR PRODCHEMICALS's long position.| Microsoft vs. Gruppo Mutuionline SpA | Microsoft vs. Air New Zealand | Microsoft vs. Ryanair Holdings plc | Microsoft vs. Salesforce |
| AIR PRODCHEMICALS vs. CapitaLand Investment Limited | AIR PRODCHEMICALS vs. SEI INVESTMENTS | AIR PRODCHEMICALS vs. AUSTEVOLL SEAFOOD | AIR PRODCHEMICALS vs. Gladstone Investment |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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