Correlation Between Microsoft and Nature
Can any of the company-specific risk be diversified away by investing in both Microsoft and Nature 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 Nature into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Nature and Environment, you can compare the effects of market volatilities on Microsoft and Nature 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 Nature. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Nature.
Diversification Opportunities for Microsoft and Nature
Good diversification
The 3 months correlation between Microsoft and Nature is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Nature and Environment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nature and Environment 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 Nature. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nature and Environment has no effect on the direction of Microsoft i.e., Microsoft and Nature go up and down completely randomly.
Pair Corralation between Microsoft and Nature
Given the investment horizon of 90 days Microsoft is expected to generate 0.57 times more return on investment than Nature. However, Microsoft is 1.75 times less risky than Nature. It trades about 0.07 of its potential returns per unit of risk. Nature and Environment is currently generating about -0.07 per unit of risk. If you would invest 33,413 in Microsoft on August 25, 2024 and sell it today you would earn a total of 8,287 from holding Microsoft or generate 24.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.05% |
| Values | Daily Returns |
Microsoft vs. Nature and Environment
Performance |
| Timeline |
| Microsoft |
| Nature and Environment |
Microsoft and Nature Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Nature
The main advantage of trading using opposite Microsoft and Nature positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Nature 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 Nature will offset losses from the drop in Nature's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Nature vs. Cube Entertainment | Nature vs. Derkwoo Electronics Co | Nature vs. MediaZen | Nature vs. Sungwoo Electronics Co |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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