Correlation Between Microsoft and WPG Holdings
Can any of the company-specific risk be diversified away by investing in both Microsoft and WPG Holdings 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 WPG Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and WPG Holdings, you can compare the effects of market volatilities on Microsoft and WPG Holdings 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 WPG Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and WPG Holdings.
Diversification Opportunities for Microsoft and WPG Holdings
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and WPG is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and WPG Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPG Holdings 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 WPG Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WPG Holdings has no effect on the direction of Microsoft i.e., Microsoft and WPG Holdings go up and down completely randomly.
Pair Corralation between Microsoft and WPG Holdings
Given the investment horizon of 90 days Microsoft is expected to generate 1.03 times less return on investment than WPG Holdings. In addition to that, Microsoft is 3.06 times more volatile than WPG Holdings. It trades about 0.04 of its total potential returns per unit of risk. WPG Holdings is currently generating about 0.14 per unit of volatility. If you would invest 4,509 in WPG Holdings on August 27, 2024 and sell it today you would earn a total of 641.00 from holding WPG Holdings or generate 14.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.58% |
| Values | Daily Returns |
Microsoft vs. WPG Holdings
Performance |
| Timeline |
| Microsoft |
| WPG Holdings |
Microsoft and WPG Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and WPG Holdings
The main advantage of trading using opposite Microsoft and WPG Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, WPG Holdings 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 WPG Holdings will offset losses from the drop in WPG Holdings' long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Rapid7 Inc |
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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