Correlation Between Microsoft and La Kaffa
Can any of the company-specific risk be diversified away by investing in both Microsoft and La Kaffa 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 La Kaffa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and La Kaffa International, you can compare the effects of market volatilities on Microsoft and La Kaffa 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 La Kaffa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and La Kaffa.
Diversification Opportunities for Microsoft and La Kaffa
Good diversification
The 3 months correlation between Microsoft and 2732 is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and La Kaffa International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on La Kaffa International 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 La Kaffa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of La Kaffa International has no effect on the direction of Microsoft i.e., Microsoft and La Kaffa go up and down completely randomly.
Pair Corralation between Microsoft and La Kaffa
Given the investment horizon of 90 days Microsoft is expected to generate 1.08 times more return on investment than La Kaffa. However, Microsoft is 1.08 times more volatile than La Kaffa International. It trades about 0.15 of its potential returns per unit of risk. La Kaffa International is currently generating about 0.09 per unit of risk. If you would invest 40,955 in Microsoft on September 2, 2024 and sell it today you would earn a total of 1,391 from holding Microsoft or generate 3.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Microsoft vs. La Kaffa International
Performance |
| Timeline |
| Microsoft |
| La Kaffa International |
Microsoft and La Kaffa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and La Kaffa
The main advantage of trading using opposite Microsoft and La Kaffa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, La Kaffa 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 La Kaffa will offset losses from the drop in La Kaffa's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| La Kaffa vs. Arbor Technology | La Kaffa vs. MedFirst Healthcare Services | La Kaffa vs. Integrated Service Technology | La Kaffa vs. STL Technology 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 Stocks Directory module to find actively traded stocks across global markets.
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