Correlation Between Microsoft and UNITED UTILITIES
Can any of the company-specific risk be diversified away by investing in both Microsoft and UNITED UTILITIES 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 UNITED UTILITIES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and UNITED UTILITIES GR, you can compare the effects of market volatilities on Microsoft and UNITED UTILITIES 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 UNITED UTILITIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and UNITED UTILITIES.
Diversification Opportunities for Microsoft and UNITED UTILITIES
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and UNITED is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and UNITED UTILITIES GR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED UTILITIES 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 UNITED UTILITIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITED UTILITIES has no effect on the direction of Microsoft i.e., Microsoft and UNITED UTILITIES go up and down completely randomly.
Pair Corralation between Microsoft and UNITED UTILITIES
Assuming the 90 days trading horizon Microsoft is expected to under-perform the UNITED UTILITIES. In addition to that, Microsoft is 1.15 times more volatile than UNITED UTILITIES GR. It trades about -0.17 of its total potential returns per unit of risk. UNITED UTILITIES GR is currently generating about 0.02 per unit of volatility. If you would invest 1,130 in UNITED UTILITIES GR on December 11, 2024 and sell it today you would earn a total of 10.00 from holding UNITED UTILITIES GR or generate 0.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. UNITED UTILITIES GR
Performance |
| Timeline |
| Microsoft |
| UNITED UTILITIES |
Microsoft and UNITED UTILITIES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and UNITED UTILITIES
The main advantage of trading using opposite Microsoft and UNITED UTILITIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, UNITED UTILITIES 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 UNITED UTILITIES will offset losses from the drop in UNITED UTILITIES's long position.| Microsoft vs. KIMBALL ELECTRONICS | Microsoft vs. Penn National Gaming | Microsoft vs. LPKF Laser Electronics | Microsoft vs. CVW CLEANTECH INC |
| UNITED UTILITIES vs. Mitsubishi Materials | UNITED UTILITIES vs. Hyster Yale Materials Handling | UNITED UTILITIES vs. NEWELL RUBBERMAID | UNITED UTILITIES vs. IBU tec advanced materials |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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