Correlation Between Microsoft and Moonbae Steel
Can any of the company-specific risk be diversified away by investing in both Microsoft and Moonbae Steel 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 Moonbae Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Moonbae Steel, you can compare the effects of market volatilities on Microsoft and Moonbae Steel 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 Moonbae Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Moonbae Steel.
Diversification Opportunities for Microsoft and Moonbae Steel
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Microsoft and Moonbae is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Moonbae Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moonbae Steel 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 Moonbae Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moonbae Steel has no effect on the direction of Microsoft i.e., Microsoft and Moonbae Steel go up and down completely randomly.
Pair Corralation between Microsoft and Moonbae Steel
Given the investment horizon of 90 days Microsoft is expected to generate 0.6 times more return on investment than Moonbae Steel. However, Microsoft is 1.67 times less risky than Moonbae Steel. It trades about 0.03 of its potential returns per unit of risk. Moonbae Steel is currently generating about -0.03 per unit of risk. If you would invest 41,356 in Microsoft on August 29, 2024 and sell it today you would earn a total of 1,443 from holding Microsoft or generate 3.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 96.0% |
| Values | Daily Returns |
Microsoft vs. Moonbae Steel
Performance |
| Timeline |
| Microsoft |
| Moonbae Steel |
Microsoft and Moonbae Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Moonbae Steel
The main advantage of trading using opposite Microsoft and Moonbae Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Moonbae Steel 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 Moonbae Steel will offset losses from the drop in Moonbae Steel's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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