Correlation Between Microsoft and CAT Strategic
Can any of the company-specific risk be diversified away by investing in both Microsoft and CAT Strategic 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 CAT Strategic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and CAT Strategic Metals, you can compare the effects of market volatilities on Microsoft and CAT Strategic 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 CAT Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and CAT Strategic.
Diversification Opportunities for Microsoft and CAT Strategic
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and CAT is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and CAT Strategic Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAT Strategic Metals 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 CAT Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAT Strategic Metals has no effect on the direction of Microsoft i.e., Microsoft and CAT Strategic go up and down completely randomly.
Pair Corralation between Microsoft and CAT Strategic
Given the investment horizon of 90 days Microsoft is expected to generate 43.6 times less return on investment than CAT Strategic. But when comparing it to its historical volatility, Microsoft is 26.01 times less risky than CAT Strategic. It trades about 0.07 of its potential returns per unit of risk. CAT Strategic Metals is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 0.38 in CAT Strategic Metals on August 29, 2024 and sell it today you would earn a total of 0.02 from holding CAT Strategic Metals or generate 5.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. CAT Strategic Metals
Performance |
| Timeline |
| Microsoft |
| CAT Strategic Metals |
Microsoft and CAT Strategic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and CAT Strategic
The main advantage of trading using opposite Microsoft and CAT Strategic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, CAT Strategic 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 CAT Strategic will offset losses from the drop in CAT Strategic's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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