Correlation Between Microsoft and M3 Technology
Can any of the company-specific risk be diversified away by investing in both Microsoft and M3 Technology 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 M3 Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and M3 Technology, you can compare the effects of market volatilities on Microsoft and M3 Technology 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 M3 Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and M3 Technology.
Diversification Opportunities for Microsoft and M3 Technology
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Microsoft and 6799 is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and M3 Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M3 Technology 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 M3 Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M3 Technology has no effect on the direction of Microsoft i.e., Microsoft and M3 Technology go up and down completely randomly.
Pair Corralation between Microsoft and M3 Technology
Given the investment horizon of 90 days Microsoft is expected to under-perform the M3 Technology. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 4.04 times less risky than M3 Technology. The stock trades about -0.21 of its potential returns per unit of risk. The M3 Technology is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 10,450 in M3 Technology on December 1, 2024 and sell it today you would earn a total of 1,400 from holding M3 Technology or generate 13.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Microsoft vs. M3 Technology
Performance |
| Timeline |
| Microsoft |
| M3 Technology |
Microsoft and M3 Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and M3 Technology
The main advantage of trading using opposite Microsoft and M3 Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, M3 Technology 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 M3 Technology will offset losses from the drop in M3 Technology's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| M3 Technology vs. Taichung Commercial Bank | M3 Technology vs. Chailease Holding Co | M3 Technology vs. Fubon Financial Holding | M3 Technology vs. Pontex Polyblend CoLtd |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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