Correlation Between Microsoft and Cleanaway
Can any of the company-specific risk be diversified away by investing in both Microsoft and Cleanaway 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 Cleanaway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Cleanaway Co, you can compare the effects of market volatilities on Microsoft and Cleanaway 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 Cleanaway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Cleanaway.
Diversification Opportunities for Microsoft and Cleanaway
Good diversification
The 3 months correlation between Microsoft and Cleanaway is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Cleanaway Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cleanaway 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 Cleanaway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cleanaway has no effect on the direction of Microsoft i.e., Microsoft and Cleanaway go up and down completely randomly.
Pair Corralation between Microsoft and Cleanaway
Given the investment horizon of 90 days Microsoft is expected to generate 5.66 times more return on investment than Cleanaway. However, Microsoft is 5.66 times more volatile than Cleanaway Co. It trades about 0.02 of its potential returns per unit of risk. Cleanaway Co is currently generating about -0.12 per unit of risk. If you would invest 42,574 in Microsoft on August 29, 2024 and sell it today you would earn a total of 225.00 from holding Microsoft or generate 0.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Cleanaway Co
Performance |
| Timeline |
| Microsoft |
| Cleanaway |
Microsoft and Cleanaway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Cleanaway
The main advantage of trading using opposite Microsoft and Cleanaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Cleanaway 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 Cleanaway will offset losses from the drop in Cleanaway'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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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