Correlation Between Microsoft and 4C Group
Can any of the company-specific risk be diversified away by investing in both Microsoft and 4C Group 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 4C Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and 4C Group AB, you can compare the effects of market volatilities on Microsoft and 4C Group 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 4C Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and 4C Group.
Diversification Opportunities for Microsoft and 4C Group
Excellent diversification
The 3 months correlation between Microsoft and 4C Group is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and 4C Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 4C Group AB 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 4C Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 4C Group AB has no effect on the direction of Microsoft i.e., Microsoft and 4C Group go up and down completely randomly.
Pair Corralation between Microsoft and 4C Group
Given the investment horizon of 90 days Microsoft is expected to generate 0.37 times more return on investment than 4C Group. However, Microsoft is 2.72 times less risky than 4C Group. It trades about 0.06 of its potential returns per unit of risk. 4C Group AB is currently generating about -0.04 per unit of risk. If you would invest 37,325 in Microsoft on September 24, 2024 and sell it today you would earn a total of 6,335 from holding Microsoft or generate 16.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Microsoft vs. 4C Group AB
Performance |
| Timeline |
| Microsoft |
| 4C Group AB |
Microsoft and 4C Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and 4C Group
The main advantage of trading using opposite Microsoft and 4C Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, 4C Group 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 4C Group will offset losses from the drop in 4C Group's long position.| Microsoft vs. BlackBerry | Microsoft vs. Global Blue Group | Microsoft vs. Aurora Mobile | Microsoft vs. Marqeta |
| 4C Group vs. B3 Consulting Group | 4C Group vs. Sleep Cycle AB | 4C Group vs. Avensia publ AB | 4C Group vs. CAG Group AB |
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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