Correlation Between Microsoft and Bank of Marin
Can any of the company-specific risk be diversified away by investing in both Microsoft and Bank of Marin 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 Bank of Marin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Bank of Marin, you can compare the effects of market volatilities on Microsoft and Bank of Marin 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 Bank of Marin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Bank of Marin.
Diversification Opportunities for Microsoft and Bank of Marin
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Bank is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Bank of Marin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Marin 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 Bank of Marin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Marin has no effect on the direction of Microsoft i.e., Microsoft and Bank of Marin go up and down completely randomly.
Pair Corralation between Microsoft and Bank of Marin
Given the investment horizon of 90 days Microsoft is expected to under-perform the Bank of Marin. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.19 times less risky than Bank of Marin. The stock trades about -0.04 of its potential returns per unit of risk. The Bank of Marin is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 2,251 in Bank of Marin on August 31, 2024 and sell it today you would earn a total of 308.00 from holding Bank of Marin or generate 13.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Bank of Marin
Performance |
| Timeline |
| Microsoft |
| Bank of Marin |
Microsoft and Bank of Marin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Bank of Marin
The main advantage of trading using opposite Microsoft and Bank of Marin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Bank of Marin 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 Bank of Marin will offset losses from the drop in Bank of Marin's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Bank of Marin vs. Community West Bancshares | Bank of Marin vs. Heritage Financial | Bank of Marin vs. First Financial Northwest | Bank of Marin vs. Sierra Bancorp |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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