Correlation Between Microsoft and PESTECH International
Can any of the company-specific risk be diversified away by investing in both Microsoft and PESTECH International 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 PESTECH International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and PESTECH International Bhd, you can compare the effects of market volatilities on Microsoft and PESTECH International 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 PESTECH International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and PESTECH International.
Diversification Opportunities for Microsoft and PESTECH International
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and PESTECH is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and PESTECH International Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PESTECH International Bhd 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 PESTECH International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PESTECH International Bhd has no effect on the direction of Microsoft i.e., Microsoft and PESTECH International go up and down completely randomly.
Pair Corralation between Microsoft and PESTECH International
Given the investment horizon of 90 days Microsoft is expected to generate 0.3 times more return on investment than PESTECH International. However, Microsoft is 3.3 times less risky than PESTECH International. It trades about 0.08 of its potential returns per unit of risk. PESTECH International Bhd is currently generating about -0.01 per unit of risk. If you would invest 24,843 in Microsoft on September 2, 2024 and sell it today you would earn a total of 17,503 from holding Microsoft or generate 70.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.78% |
| Values | Daily Returns |
Microsoft vs. PESTECH International Bhd
Performance |
| Timeline |
| Microsoft |
| PESTECH International Bhd |
Microsoft and PESTECH International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and PESTECH International
The main advantage of trading using opposite Microsoft and PESTECH International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, PESTECH International 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 PESTECH International will offset losses from the drop in PESTECH International'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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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