Correlation Between Microsoft and KAUFMAN ET
Can any of the company-specific risk be diversified away by investing in both Microsoft and KAUFMAN ET 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 KAUFMAN ET into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and KAUFMAN ET BROAD, you can compare the effects of market volatilities on Microsoft and KAUFMAN ET 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 KAUFMAN ET. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and KAUFMAN ET.
Diversification Opportunities for Microsoft and KAUFMAN ET
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and KAUFMAN is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and KAUFMAN ET BROAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KAUFMAN ET BROAD 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 KAUFMAN ET. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KAUFMAN ET BROAD has no effect on the direction of Microsoft i.e., Microsoft and KAUFMAN ET go up and down completely randomly.
Pair Corralation between Microsoft and KAUFMAN ET
Given the investment horizon of 90 days Microsoft is expected to generate 0.75 times more return on investment than KAUFMAN ET. However, Microsoft is 1.33 times less risky than KAUFMAN ET. It trades about 0.08 of its potential returns per unit of risk. KAUFMAN ET BROAD is currently generating about 0.05 per unit of risk. If you would invest 24,616 in Microsoft on August 25, 2024 and sell it today you would earn a total of 17,084 from holding Microsoft or generate 69.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.02% |
| Values | Daily Returns |
Microsoft vs. KAUFMAN ET BROAD
Performance |
| Timeline |
| Microsoft |
| KAUFMAN ET BROAD |
Microsoft and KAUFMAN ET Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and KAUFMAN ET
The main advantage of trading using opposite Microsoft and KAUFMAN ET positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, KAUFMAN ET 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 KAUFMAN ET will offset losses from the drop in KAUFMAN ET's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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