Correlation Between Microsoft and Compass Diversified
Can any of the company-specific risk be diversified away by investing in both Microsoft and Compass Diversified 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 Compass Diversified into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Compass Diversified Holdings, you can compare the effects of market volatilities on Microsoft and Compass Diversified 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 Compass Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Compass Diversified.
Diversification Opportunities for Microsoft and Compass Diversified
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Compass is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Compass Diversified Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Diversified 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 Compass Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Diversified has no effect on the direction of Microsoft i.e., Microsoft and Compass Diversified go up and down completely randomly.
Pair Corralation between Microsoft and Compass Diversified
Given the investment horizon of 90 days Microsoft is expected to generate 1.49 times more return on investment than Compass Diversified. However, Microsoft is 1.49 times more volatile than Compass Diversified Holdings. It trades about 0.03 of its potential returns per unit of risk. Compass Diversified Holdings is currently generating about -0.01 per unit of risk. If you would invest 40,817 in Microsoft on October 29, 2024 and sell it today you would earn a total of 3,589 from holding Microsoft or generate 8.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Microsoft vs. Compass Diversified Holdings
Performance |
| Timeline |
| Microsoft |
| Compass Diversified |
Microsoft and Compass Diversified Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Compass Diversified
The main advantage of trading using opposite Microsoft and Compass Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Compass Diversified 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 Compass Diversified will offset losses from the drop in Compass Diversified's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. BLOCK INC | Microsoft vs. Adobe Systems Incorporated |
| Compass Diversified vs. Wheels Up Experience | Compass Diversified vs. Ryanair Holdings PLC | Compass Diversified vs. Alaska Air Group | Compass Diversified vs. Fair Isaac |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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