Correlation Between Microsoft and EV Advanced
Can any of the company-specific risk be diversified away by investing in both Microsoft and EV Advanced 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 EV Advanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and EV Advanced Material, you can compare the effects of market volatilities on Microsoft and EV Advanced 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 EV Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and EV Advanced.
Diversification Opportunities for Microsoft and EV Advanced
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and 131400 is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and EV Advanced Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EV Advanced Material 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 EV Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EV Advanced Material has no effect on the direction of Microsoft i.e., Microsoft and EV Advanced go up and down completely randomly.
Pair Corralation between Microsoft and EV Advanced
Given the investment horizon of 90 days Microsoft is expected to under-perform the EV Advanced. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.99 times less risky than EV Advanced. The stock trades about -0.04 of its potential returns per unit of risk. The EV Advanced Material is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 209,500 in EV Advanced Material on August 25, 2024 and sell it today you would earn a total of 1,000.00 from holding EV Advanced Material or generate 0.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Microsoft vs. EV Advanced Material
Performance |
| Timeline |
| Microsoft |
| EV Advanced Material |
Microsoft and EV Advanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and EV Advanced
The main advantage of trading using opposite Microsoft and EV Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, EV Advanced 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 EV Advanced will offset losses from the drop in EV Advanced's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| EV Advanced vs. Display Tech Co | EV Advanced vs. Lion Chemtech Co | EV Advanced vs. Amogreentech Co | EV Advanced vs. Vitzro Tech 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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