Correlation Between Microsoft and Netmedia Group
Can any of the company-specific risk be diversified away by investing in both Microsoft and Netmedia Group 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 Netmedia Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Netmedia Group SA, you can compare the effects of market volatilities on Microsoft and Netmedia Group 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 Netmedia Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Netmedia Group.
Diversification Opportunities for Microsoft and Netmedia Group
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Netmedia is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Netmedia Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netmedia Group SA 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 Netmedia Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netmedia Group SA has no effect on the direction of Microsoft i.e., Microsoft and Netmedia Group go up and down completely randomly.
Pair Corralation between Microsoft and Netmedia Group
Given the investment horizon of 90 days Microsoft is expected to under-perform the Netmedia Group. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.61 times less risky than Netmedia Group. The stock trades about -0.04 of its potential returns per unit of risk. The Netmedia Group SA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 169.00 in Netmedia Group SA on August 28, 2024 and sell it today you would earn a total of 10.00 from holding Netmedia Group SA or generate 5.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Netmedia Group SA
Performance |
| Timeline |
| Microsoft |
| Netmedia Group SA |
Microsoft and Netmedia Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Netmedia Group
The main advantage of trading using opposite Microsoft and Netmedia Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Netmedia Group 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 Netmedia Group will offset losses from the drop in Netmedia Group'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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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