Correlation Between Microsoft and Cannae Holdings
Can any of the company-specific risk be diversified away by investing in both Microsoft and Cannae Holdings 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 Cannae Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Cannae Holdings, you can compare the effects of market volatilities on Microsoft and Cannae Holdings 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 Cannae Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Cannae Holdings.
Diversification Opportunities for Microsoft and Cannae Holdings
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Cannae is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Cannae Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cannae Holdings 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 Cannae Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cannae Holdings has no effect on the direction of Microsoft i.e., Microsoft and Cannae Holdings go up and down completely randomly.
Pair Corralation between Microsoft and Cannae Holdings
Given the investment horizon of 90 days Microsoft is expected to under-perform the Cannae Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.04 times less risky than Cannae Holdings. The stock trades about -0.04 of its potential returns per unit of risk. The Cannae Holdings is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 1,947 in Cannae Holdings on August 28, 2024 and sell it today you would earn a total of 224.00 from holding Cannae Holdings or generate 11.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Cannae Holdings
Performance |
| Timeline |
| Microsoft |
| Cannae Holdings |
Microsoft and Cannae Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Cannae Holdings
The main advantage of trading using opposite Microsoft and Cannae Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Cannae Holdings 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 Cannae Holdings will offset losses from the drop in Cannae Holdings' 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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