Correlation Between Microsoft Corp and Canadian Utilities
Can any of the company-specific risk be diversified away by investing in both Microsoft Corp and Canadian 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 Corp and Canadian Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft Corp CDR and Canadian Utilities Ltd, you can compare the effects of market volatilities on Microsoft Corp and Canadian 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 Corp with a short position of Canadian Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft Corp and Canadian Utilities.
Diversification Opportunities for Microsoft Corp and Canadian Utilities
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Canadian is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp CDR and Canadian Utilities Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Utilities and Microsoft Corp 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 Corp CDR are associated (or correlated) with Canadian Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Utilities has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and Canadian Utilities go up and down completely randomly.
Pair Corralation between Microsoft Corp and Canadian Utilities
Assuming the 90 days trading horizon Microsoft Corp CDR is expected to generate 1.83 times more return on investment than Canadian Utilities. However, Microsoft Corp is 1.83 times more volatile than Canadian Utilities Ltd. It trades about 0.12 of its potential returns per unit of risk. Canadian Utilities Ltd is currently generating about 0.0 per unit of risk. If you would invest 2,995 in Microsoft Corp CDR on September 5, 2024 and sell it today you would earn a total of 201.00 from holding Microsoft Corp CDR or generate 6.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft Corp CDR vs. Canadian Utilities Ltd
Performance |
| Timeline |
| Microsoft Corp CDR |
| Canadian Utilities |
Microsoft Corp and Canadian Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft Corp and Canadian Utilities
The main advantage of trading using opposite Microsoft Corp and Canadian Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft Corp position performs unexpectedly, Canadian 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 Canadian Utilities will offset losses from the drop in Canadian Utilities' long position.| Microsoft Corp vs. DIRTT Environmental Solutions | Microsoft Corp vs. Labrador Iron Ore | Microsoft Corp vs. Primaris Retail RE | Microsoft Corp vs. Gfl Environmental Holdings |
| Canadian Utilities vs. Berkshire Hathaway CDR | Canadian Utilities vs. Microsoft Corp CDR | Canadian Utilities vs. Apple Inc CDR | Canadian Utilities vs. Alphabet Inc CDR |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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