Correlation Between Microsoft and Curtiss Motorcycles
Can any of the company-specific risk be diversified away by investing in both Microsoft and Curtiss Motorcycles 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 Curtiss Motorcycles into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Curtiss Motorcycles, you can compare the effects of market volatilities on Microsoft and Curtiss Motorcycles 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 Curtiss Motorcycles. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Curtiss Motorcycles.
Diversification Opportunities for Microsoft and Curtiss Motorcycles
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Curtiss is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Curtiss Motorcycles in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Curtiss Motorcycles 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 Curtiss Motorcycles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Curtiss Motorcycles has no effect on the direction of Microsoft i.e., Microsoft and Curtiss Motorcycles go up and down completely randomly.
Pair Corralation between Microsoft and Curtiss Motorcycles
Given the investment horizon of 90 days Microsoft is expected to generate 446.33 times less return on investment than Curtiss Motorcycles. But when comparing it to its historical volatility, Microsoft is 90.12 times less risky than Curtiss Motorcycles. It trades about 0.02 of its potential returns per unit of risk. Curtiss Motorcycles is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 7.50 in Curtiss Motorcycles on August 31, 2024 and sell it today you would lose (5.20) from holding Curtiss Motorcycles or give up 69.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Microsoft vs. Curtiss Motorcycles
Performance |
| Timeline |
| Microsoft |
| Curtiss Motorcycles |
Microsoft and Curtiss Motorcycles Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Curtiss Motorcycles
The main advantage of trading using opposite Microsoft and Curtiss Motorcycles positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Curtiss Motorcycles 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 Curtiss Motorcycles will offset losses from the drop in Curtiss Motorcycles' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Curtiss Motorcycles vs. Life Electric Vehicles | Curtiss Motorcycles vs. Evil Empire Designs | Curtiss Motorcycles vs. Twin Vee Powercats | Curtiss Motorcycles vs. LCI Industries |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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