Correlation Between Microsoft and CA Modas
Can any of the company-specific risk be diversified away by investing in both Microsoft and CA Modas 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 CA Modas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and CA Modas SA, you can compare the effects of market volatilities on Microsoft and CA Modas 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 CA Modas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and CA Modas.
Diversification Opportunities for Microsoft and CA Modas
Significant diversification
The 3 months correlation between Microsoft and CEAB3 is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and CA Modas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CA Modas 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 CA Modas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CA Modas SA has no effect on the direction of Microsoft i.e., Microsoft and CA Modas go up and down completely randomly.
Pair Corralation between Microsoft and CA Modas
Given the investment horizon of 90 days Microsoft is expected to generate 0.34 times more return on investment than CA Modas. However, Microsoft is 2.93 times less risky than CA Modas. It trades about -0.04 of its potential returns per unit of risk. CA Modas SA is currently generating about -0.2 per unit of risk. If you would invest 43,167 in Microsoft on August 31, 2024 and sell it today you would lose (868.00) from holding Microsoft or give up 2.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Microsoft vs. CA Modas SA
Performance |
| Timeline |
| Microsoft |
| CA Modas SA |
Microsoft and CA Modas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and CA Modas
The main advantage of trading using opposite Microsoft and CA Modas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, CA Modas 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 CA Modas will offset losses from the drop in CA Modas' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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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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