Correlation Between Microsoft Corp and NeuPath Health
Can any of the company-specific risk be diversified away by investing in both Microsoft Corp and NeuPath Health 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 NeuPath Health 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 NeuPath Health, you can compare the effects of market volatilities on Microsoft Corp and NeuPath Health 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 NeuPath Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft Corp and NeuPath Health.
Diversification Opportunities for Microsoft Corp and NeuPath Health
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and NeuPath is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp CDR and NeuPath Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NeuPath Health 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 NeuPath Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NeuPath Health has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and NeuPath Health go up and down completely randomly.
Pair Corralation between Microsoft Corp and NeuPath Health
Assuming the 90 days trading horizon Microsoft Corp is expected to generate 2.44 times less return on investment than NeuPath Health. But when comparing it to its historical volatility, Microsoft Corp CDR is 3.74 times less risky than NeuPath Health. It trades about 0.07 of its potential returns per unit of risk. NeuPath Health is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 14.00 in NeuPath Health on November 5, 2024 and sell it today you would earn a total of 8.00 from holding NeuPath Health or generate 57.14% 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. NeuPath Health
Performance |
| Timeline |
| Microsoft Corp CDR |
| NeuPath Health |
Microsoft Corp and NeuPath Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft Corp and NeuPath Health
The main advantage of trading using opposite Microsoft Corp and NeuPath Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft Corp position performs unexpectedly, NeuPath Health 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 NeuPath Health will offset losses from the drop in NeuPath Health's long position.| Microsoft Corp vs. Firan Technology Group | Microsoft Corp vs. Oncolytics Biotech | Microsoft Corp vs. Imperial Metals | Microsoft Corp vs. Data Communications Management |
| NeuPath Health vs. South Pacific Metals | NeuPath Health vs. Information Services | NeuPath Health vs. Doman Building Materials | NeuPath Health vs. Flow Beverage Corp |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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