Correlation Between Microsoft and NISSAN CHEMICAL
Can any of the company-specific risk be diversified away by investing in both Microsoft and NISSAN CHEMICAL 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 NISSAN CHEMICAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and NISSAN CHEMICAL IND, you can compare the effects of market volatilities on Microsoft and NISSAN CHEMICAL 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 NISSAN CHEMICAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and NISSAN CHEMICAL.
Diversification Opportunities for Microsoft and NISSAN CHEMICAL
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microsoft and NISSAN is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and NISSAN CHEMICAL IND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NISSAN CHEMICAL IND 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 NISSAN CHEMICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NISSAN CHEMICAL IND has no effect on the direction of Microsoft i.e., Microsoft and NISSAN CHEMICAL go up and down completely randomly.
Pair Corralation between Microsoft and NISSAN CHEMICAL
Assuming the 90 days trading horizon Microsoft is expected to generate 0.85 times more return on investment than NISSAN CHEMICAL. However, Microsoft is 1.17 times less risky than NISSAN CHEMICAL. It trades about 0.08 of its potential returns per unit of risk. NISSAN CHEMICAL IND is currently generating about -0.03 per unit of risk. If you would invest 22,929 in Microsoft on August 27, 2024 and sell it today you would earn a total of 16,866 from holding Microsoft or generate 73.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. NISSAN CHEMICAL IND
Performance |
| Timeline |
| Microsoft |
| NISSAN CHEMICAL IND |
Microsoft and NISSAN CHEMICAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and NISSAN CHEMICAL
The main advantage of trading using opposite Microsoft and NISSAN CHEMICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, NISSAN CHEMICAL 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 NISSAN CHEMICAL will offset losses from the drop in NISSAN CHEMICAL's long position.| Microsoft vs. Zijin Mining Group | Microsoft vs. GALENA MINING LTD | Microsoft vs. Lion One Metals | Microsoft vs. United Utilities Group |
| NISSAN CHEMICAL vs. Apple Inc | NISSAN CHEMICAL vs. Apple Inc | NISSAN CHEMICAL vs. Apple Inc | NISSAN CHEMICAL vs. Microsoft |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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