Correlation Between Microsoft and Quanta Storage
Can any of the company-specific risk be diversified away by investing in both Microsoft and Quanta Storage 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 Quanta Storage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Quanta Storage, you can compare the effects of market volatilities on Microsoft and Quanta Storage 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 Quanta Storage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Quanta Storage.
Diversification Opportunities for Microsoft and Quanta Storage
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Quanta is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Quanta Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quanta Storage 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 Quanta Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quanta Storage has no effect on the direction of Microsoft i.e., Microsoft and Quanta Storage go up and down completely randomly.
Pair Corralation between Microsoft and Quanta Storage
Given the investment horizon of 90 days Microsoft is expected to generate 1.85 times less return on investment than Quanta Storage. But when comparing it to its historical volatility, Microsoft is 2.31 times less risky than Quanta Storage. It trades about 0.09 of its potential returns per unit of risk. Quanta Storage is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 4,412 in Quanta Storage on August 27, 2024 and sell it today you would earn a total of 5,068 from holding Quanta Storage or generate 114.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.8% |
| Values | Daily Returns |
Microsoft vs. Quanta Storage
Performance |
| Timeline |
| Microsoft |
| Quanta Storage |
Microsoft and Quanta Storage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Quanta Storage
The main advantage of trading using opposite Microsoft and Quanta Storage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Quanta Storage 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 Quanta Storage will offset losses from the drop in Quanta Storage's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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