Correlation Between Microsoft and Columbus McKinnon
Can any of the company-specific risk be diversified away by investing in both Microsoft and Columbus McKinnon 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 Columbus McKinnon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Columbus McKinnon, you can compare the effects of market volatilities on Microsoft and Columbus McKinnon 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 Columbus McKinnon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Columbus McKinnon.
Diversification Opportunities for Microsoft and Columbus McKinnon
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Columbus is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Columbus McKinnon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbus McKinnon 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 Columbus McKinnon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbus McKinnon has no effect on the direction of Microsoft i.e., Microsoft and Columbus McKinnon go up and down completely randomly.
Pair Corralation between Microsoft and Columbus McKinnon
Given the investment horizon of 90 days Microsoft is expected to under-perform the Columbus McKinnon. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.6 times less risky than Columbus McKinnon. The stock trades about -0.04 of its potential returns per unit of risk. The Columbus McKinnon is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 3,283 in Columbus McKinnon on August 27, 2024 and sell it today you would earn a total of 716.00 from holding Columbus McKinnon or generate 21.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Columbus McKinnon
Performance |
| Timeline |
| Microsoft |
| Columbus McKinnon |
Microsoft and Columbus McKinnon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Columbus McKinnon
The main advantage of trading using opposite Microsoft and Columbus McKinnon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Columbus McKinnon 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 Columbus McKinnon will offset losses from the drop in Columbus McKinnon's 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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