Correlation Between Microsoft and CeoTronics
Can any of the company-specific risk be diversified away by investing in both Microsoft and CeoTronics 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 CeoTronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and CeoTronics AG, you can compare the effects of market volatilities on Microsoft and CeoTronics 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 CeoTronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and CeoTronics.
Diversification Opportunities for Microsoft and CeoTronics
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and CeoTronics is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and CeoTronics AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CeoTronics AG 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 CeoTronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CeoTronics AG has no effect on the direction of Microsoft i.e., Microsoft and CeoTronics go up and down completely randomly.
Pair Corralation between Microsoft and CeoTronics
Given the investment horizon of 90 days Microsoft is expected to generate 2.09 times less return on investment than CeoTronics. But when comparing it to its historical volatility, Microsoft is 1.91 times less risky than CeoTronics. It trades about 0.06 of its potential returns per unit of risk. CeoTronics AG is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 341.00 in CeoTronics AG on August 28, 2024 and sell it today you would earn a total of 184.00 from holding CeoTronics AG or generate 53.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.88% |
| Values | Daily Returns |
Microsoft vs. CeoTronics AG
Performance |
| Timeline |
| Microsoft |
| CeoTronics AG |
Microsoft and CeoTronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and CeoTronics
The main advantage of trading using opposite Microsoft and CeoTronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, CeoTronics 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 CeoTronics will offset losses from the drop in CeoTronics' long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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