Correlation Between Microsoft and Rafael Microelectronics
Can any of the company-specific risk be diversified away by investing in both Microsoft and Rafael Microelectronics 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 Rafael Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Rafael Microelectronics, you can compare the effects of market volatilities on Microsoft and Rafael Microelectronics 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 Rafael Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Rafael Microelectronics.
Diversification Opportunities for Microsoft and Rafael Microelectronics
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Rafael is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Rafael Microelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rafael Microelectronics 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 Rafael Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rafael Microelectronics has no effect on the direction of Microsoft i.e., Microsoft and Rafael Microelectronics go up and down completely randomly.
Pair Corralation between Microsoft and Rafael Microelectronics
Given the investment horizon of 90 days Microsoft is expected to generate 0.72 times more return on investment than Rafael Microelectronics. However, Microsoft is 1.4 times less risky than Rafael Microelectronics. It trades about 0.15 of its potential returns per unit of risk. Rafael Microelectronics is currently generating about -0.23 per unit of risk. If you would invest 40,955 in Microsoft on September 2, 2024 and sell it today you would earn a total of 1,391 from holding Microsoft or generate 3.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Microsoft vs. Rafael Microelectronics
Performance |
| Timeline |
| Microsoft |
| Rafael Microelectronics |
Microsoft and Rafael Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Rafael Microelectronics
The main advantage of trading using opposite Microsoft and Rafael Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Rafael Microelectronics 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 Rafael Microelectronics will offset losses from the drop in Rafael Microelectronics' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Rafael Microelectronics vs. Asia Metal Industries | Rafael Microelectronics vs. SS Healthcare Holding | Rafael Microelectronics vs. Thermaltake Technology Co | Rafael Microelectronics vs. CHC Healthcare Group |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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