Correlation Between Microsoft and Charter Hall
Can any of the company-specific risk be diversified away by investing in both Microsoft and Charter Hall 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 Charter Hall into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Charter Hall Long, you can compare the effects of market volatilities on Microsoft and Charter Hall 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 Charter Hall. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Charter Hall.
Diversification Opportunities for Microsoft and Charter Hall
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Microsoft and Charter is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Charter Hall Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Hall Long 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 Charter Hall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charter Hall Long has no effect on the direction of Microsoft i.e., Microsoft and Charter Hall go up and down completely randomly.
Pair Corralation between Microsoft and Charter Hall
Given the investment horizon of 90 days Microsoft is expected to generate 1.0 times more return on investment than Charter Hall. However, Microsoft is 1.0 times more volatile than Charter Hall Long. It trades about 0.08 of its potential returns per unit of risk. Charter Hall Long is currently generating about 0.01 per unit of risk. If you would invest 25,277 in Microsoft on September 3, 2024 and sell it today you would earn a total of 17,821 from holding Microsoft or generate 70.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.2% |
| Values | Daily Returns |
Microsoft vs. Charter Hall Long
Performance |
| Timeline |
| Microsoft |
| Charter Hall Long |
Microsoft and Charter Hall Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Charter Hall
The main advantage of trading using opposite Microsoft and Charter Hall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Charter Hall 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 Charter Hall will offset losses from the drop in Charter Hall's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Charter Hall vs. Skycity Entertainment Group | Charter Hall vs. Actinogen Medical | Charter Hall vs. Alto Metals | Charter Hall vs. 29Metals |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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