Correlation Between Microsoft and Constellation Energy
Can any of the company-specific risk be diversified away by investing in both Microsoft and Constellation Energy 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 Constellation Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Constellation Energy Corp, you can compare the effects of market volatilities on Microsoft and Constellation Energy 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 Constellation Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Constellation Energy.
Diversification Opportunities for Microsoft and Constellation Energy
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Constellation is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Constellation Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Energy Corp 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 Constellation Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellation Energy Corp has no effect on the direction of Microsoft i.e., Microsoft and Constellation Energy go up and down completely randomly.
Pair Corralation between Microsoft and Constellation Energy
Given the investment horizon of 90 days Microsoft is expected to generate 0.48 times more return on investment than Constellation Energy. However, Microsoft is 2.09 times less risky than Constellation Energy. It trades about -0.08 of its potential returns per unit of risk. Constellation Energy Corp is currently generating about -0.05 per unit of risk. If you would invest 42,666 in Microsoft on August 23, 2024 and sell it today you would lose (1,379) from holding Microsoft or give up 3.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Constellation Energy Corp
Performance |
| Timeline |
| Microsoft |
| Constellation Energy Corp |
Microsoft and Constellation Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Constellation Energy
The main advantage of trading using opposite Microsoft and Constellation Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Constellation Energy 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 Constellation Energy will offset losses from the drop in Constellation Energy's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Constellation Energy vs. Atlantica Sustainable Infrastructure | Constellation Energy vs. Clearway Energy | Constellation Energy vs. Brookfield Renewable Corp | Constellation Energy vs. Nextera Energy Partners |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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