Correlation Between Microsoft and Pegatron Corp
Can any of the company-specific risk be diversified away by investing in both Microsoft and Pegatron Corp 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 Pegatron Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Pegatron Corp, you can compare the effects of market volatilities on Microsoft and Pegatron Corp 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 Pegatron Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Pegatron Corp.
Diversification Opportunities for Microsoft and Pegatron Corp
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Pegatron is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Pegatron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pegatron Corp 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 Pegatron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pegatron Corp has no effect on the direction of Microsoft i.e., Microsoft and Pegatron Corp go up and down completely randomly.
Pair Corralation between Microsoft and Pegatron Corp
Given the investment horizon of 90 days Microsoft is expected to generate 1.18 times more return on investment than Pegatron Corp. However, Microsoft is 1.18 times more volatile than Pegatron Corp. It trades about -0.04 of its potential returns per unit of risk. Pegatron Corp is currently generating about -0.15 per unit of risk. If you would invest 42,574 in Microsoft on August 28, 2024 and sell it today you would lose (695.00) from holding Microsoft or give up 1.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Pegatron Corp
Performance |
| Timeline |
| Microsoft |
| Pegatron Corp |
Microsoft and Pegatron Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Pegatron Corp
The main advantage of trading using opposite Microsoft and Pegatron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Pegatron Corp 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 Pegatron Corp will offset losses from the drop in Pegatron Corp's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| Pegatron Corp vs. Wistron Corp | Pegatron Corp vs. Quanta Computer | Pegatron Corp vs. Compal Electronics | Pegatron Corp vs. Catcher 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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