Correlation Between Microsoft and Universal Microelectronics
Can any of the company-specific risk be diversified away by investing in both Microsoft and Universal Microelectronics 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 Universal Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Universal Microelectronics Co, you can compare the effects of market volatilities on Microsoft and Universal Microelectronics 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 Universal Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Universal Microelectronics.
Diversification Opportunities for Microsoft and Universal Microelectronics
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Universal is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Universal Microelectronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Microelectronics 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 Universal Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Microelectronics has no effect on the direction of Microsoft i.e., Microsoft and Universal Microelectronics go up and down completely randomly.
Pair Corralation between Microsoft and Universal Microelectronics
Given the investment horizon of 90 days Microsoft is expected to generate 2.79 times less return on investment than Universal Microelectronics. But when comparing it to its historical volatility, Microsoft is 2.3 times less risky than Universal Microelectronics. It trades about 0.04 of its potential returns per unit of risk. Universal Microelectronics Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,090 in Universal Microelectronics Co on November 3, 2024 and sell it today you would earn a total of 255.00 from holding Universal Microelectronics Co or generate 12.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.8% |
| Values | Daily Returns |
Microsoft vs. Universal Microelectronics Co
Performance |
| Timeline |
| Microsoft |
| Universal Microelectronics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Microsoft and Universal Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Universal Microelectronics
The main advantage of trading using opposite Microsoft and Universal Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Universal Microelectronics 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 Universal Microelectronics will offset losses from the drop in Universal Microelectronics' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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