Correlation Between Microsoft Corp and ESE Entertainment
Can any of the company-specific risk be diversified away by investing in both Microsoft Corp and ESE Entertainment 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 ESE Entertainment 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 ESE Entertainment, you can compare the effects of market volatilities on Microsoft Corp and ESE Entertainment 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 ESE Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft Corp and ESE Entertainment.
Diversification Opportunities for Microsoft Corp and ESE Entertainment
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and ESE is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp CDR and ESE Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESE Entertainment 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 ESE Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESE Entertainment has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and ESE Entertainment go up and down completely randomly.
Pair Corralation between Microsoft Corp and ESE Entertainment
Assuming the 90 days trading horizon Microsoft Corp CDR is expected to generate 0.26 times more return on investment than ESE Entertainment. However, Microsoft Corp CDR is 3.86 times less risky than ESE Entertainment. It trades about 0.01 of its potential returns per unit of risk. ESE Entertainment is currently generating about -0.1 per unit of risk. If you would invest 3,120 in Microsoft Corp CDR on August 29, 2024 and sell it today you would earn a total of 6.00 from holding Microsoft Corp CDR or generate 0.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft Corp CDR vs. ESE Entertainment
Performance |
| Timeline |
| Microsoft Corp CDR |
| ESE Entertainment |
Microsoft Corp and ESE Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft Corp and ESE Entertainment
The main advantage of trading using opposite Microsoft Corp and ESE Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft Corp position performs unexpectedly, ESE Entertainment 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 ESE Entertainment will offset losses from the drop in ESE Entertainment's long position.| Microsoft Corp vs. Telus Corp | Microsoft Corp vs. Toronto Dominion Bank | Microsoft Corp vs. Manulife Financial Corp | Microsoft Corp vs. Canadian Natural Resources |
| ESE Entertainment vs. Westbond Enterprises Corp | ESE Entertainment vs. Network Media Group | ESE Entertainment vs. Thunderbird Entertainment Group | ESE Entertainment vs. iShares Canadian HYBrid |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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