Correlation Between Microsoft and Cineplex
Can any of the company-specific risk be diversified away by investing in both Microsoft and Cineplex 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 Cineplex into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Cineplex, you can compare the effects of market volatilities on Microsoft and Cineplex 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 Cineplex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Cineplex.
Diversification Opportunities for Microsoft and Cineplex
Average diversification
The 3 months correlation between Microsoft and Cineplex is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Cineplex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cineplex 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 Cineplex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cineplex has no effect on the direction of Microsoft i.e., Microsoft and Cineplex go up and down completely randomly.
Pair Corralation between Microsoft and Cineplex
Given the investment horizon of 90 days Microsoft is expected to generate 1.83 times less return on investment than Cineplex. But when comparing it to its historical volatility, Microsoft is 1.45 times less risky than Cineplex. It trades about 0.04 of its potential returns per unit of risk. Cineplex is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 837.00 in Cineplex on August 25, 2024 and sell it today you would earn a total of 184.00 from holding Cineplex or generate 21.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Cineplex
Performance |
| Timeline |
| Microsoft |
| Cineplex |
Microsoft and Cineplex Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Cineplex
The main advantage of trading using opposite Microsoft and Cineplex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Cineplex 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 Cineplex will offset losses from the drop in Cineplex's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Cineplex vs. Air Canada | Cineplex vs. BlackBerry | Cineplex vs. Suncor Energy | Cineplex vs. Drone Delivery Canada |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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