Correlation Between Microsoft and ETRACS Alerian
Can any of the company-specific risk be diversified away by investing in both Microsoft and ETRACS Alerian 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 ETRACS Alerian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and ETRACS Alerian Midstream, you can compare the effects of market volatilities on Microsoft and ETRACS Alerian 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 ETRACS Alerian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and ETRACS Alerian.
Diversification Opportunities for Microsoft and ETRACS Alerian
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and ETRACS is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and ETRACS Alerian Midstream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS Alerian Midstream 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 ETRACS Alerian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS Alerian Midstream has no effect on the direction of Microsoft i.e., Microsoft and ETRACS Alerian go up and down completely randomly.
Pair Corralation between Microsoft and ETRACS Alerian
Given the investment horizon of 90 days Microsoft is expected to generate 1.59 times more return on investment than ETRACS Alerian. However, Microsoft is 1.59 times more volatile than ETRACS Alerian Midstream. It trades about 0.08 of its potential returns per unit of risk. ETRACS Alerian Midstream is currently generating about 0.12 per unit of risk. If you would invest 24,616 in Microsoft on August 26, 2024 and sell it today you would earn a total of 17,084 from holding Microsoft or generate 69.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. ETRACS Alerian Midstream
Performance |
| Timeline |
| Microsoft |
| ETRACS Alerian Midstream |
Microsoft and ETRACS Alerian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and ETRACS Alerian
The main advantage of trading using opposite Microsoft and ETRACS Alerian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, ETRACS Alerian 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 ETRACS Alerian will offset losses from the drop in ETRACS Alerian's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| ETRACS Alerian vs. UBS AG London | ETRACS Alerian vs. ETRACS 2xMonthly Pay | ETRACS Alerian vs. UBS AG London |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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