Correlation Between Microsoft and Vivendi SA
Can any of the company-specific risk be diversified away by investing in both Microsoft and Vivendi SA 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 Vivendi SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Vivendi SA, you can compare the effects of market volatilities on Microsoft and Vivendi SA 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 Vivendi SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Vivendi SA.
Diversification Opportunities for Microsoft and Vivendi SA
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Vivendi is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Vivendi SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vivendi SA 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 Vivendi SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vivendi SA has no effect on the direction of Microsoft i.e., Microsoft and Vivendi SA go up and down completely randomly.
Pair Corralation between Microsoft and Vivendi SA
Given the investment horizon of 90 days Microsoft is expected to generate 1.0 times more return on investment than Vivendi SA. However, Microsoft is 1.0 times less risky than Vivendi SA. It trades about 0.07 of its potential returns per unit of risk. Vivendi SA is currently generating about -0.02 per unit of risk. If you would invest 37,049 in Microsoft on September 14, 2024 and sell it today you would earn a total of 7,688 from holding Microsoft or generate 20.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Microsoft vs. Vivendi SA
Performance |
| Timeline |
| Microsoft |
| Vivendi SA |
Microsoft and Vivendi SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Vivendi SA
The main advantage of trading using opposite Microsoft and Vivendi SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Vivendi SA 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 Vivendi SA will offset losses from the drop in Vivendi SA's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Vivendi SA vs. Lowland Investment Co | Vivendi SA vs. Southwest Airlines Co | Vivendi SA vs. Taylor Maritime Investments | Vivendi SA vs. Schroders Investment Trusts |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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