Correlation Between Microsoft and Pan Ocean
Can any of the company-specific risk be diversified away by investing in both Microsoft and Pan Ocean 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 Pan Ocean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Pan Ocean Co, you can compare the effects of market volatilities on Microsoft and Pan Ocean 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 Pan Ocean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Pan Ocean.
Diversification Opportunities for Microsoft and Pan Ocean
Excellent diversification
The 3 months correlation between Microsoft and Pan is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Pan Ocean Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan Ocean 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 Pan Ocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan Ocean has no effect on the direction of Microsoft i.e., Microsoft and Pan Ocean go up and down completely randomly.
Pair Corralation between Microsoft and Pan Ocean
Given the investment horizon of 90 days Microsoft is expected to under-perform the Pan Ocean. In addition to that, Microsoft is 1.12 times more volatile than Pan Ocean Co. It trades about -0.05 of its total potential returns per unit of risk. Pan Ocean Co is currently generating about 0.13 per unit of volatility. If you would invest 348,000 in Pan Ocean Co on August 27, 2024 and sell it today you would earn a total of 14,000 from holding Pan Ocean Co or generate 4.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Pan Ocean Co
Performance |
| Timeline |
| Microsoft |
| Pan Ocean |
Microsoft and Pan Ocean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Pan Ocean
The main advantage of trading using opposite Microsoft and Pan Ocean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Pan Ocean 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 Pan Ocean will offset losses from the drop in Pan Ocean's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Rapid7 Inc |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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