Correlation Between Microsoft and Clean Energy
Can any of the company-specific risk be diversified away by investing in both Microsoft and Clean Energy 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 Clean Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Clean Energy Pathway, you can compare the effects of market volatilities on Microsoft and Clean Energy 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 Clean Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Clean Energy.
Diversification Opportunities for Microsoft and Clean Energy
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Microsoft and Clean is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Clean Energy Pathway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Energy Pathway 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 Clean Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Energy Pathway has no effect on the direction of Microsoft i.e., Microsoft and Clean Energy go up and down completely randomly.
Pair Corralation between Microsoft and Clean Energy
Given the investment horizon of 90 days Microsoft is expected to generate 0.23 times more return on investment than Clean Energy. However, Microsoft is 4.39 times less risky than Clean Energy. It trades about 0.09 of its potential returns per unit of risk. Clean Energy Pathway is currently generating about -0.09 per unit of risk. If you would invest 31,884 in Microsoft on September 12, 2024 and sell it today you would earn a total of 12,992 from holding Microsoft or generate 40.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.7% |
| Values | Daily Returns |
Microsoft vs. Clean Energy Pathway
Performance |
| Timeline |
| Microsoft |
| Clean Energy Pathway |
Microsoft and Clean Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Clean Energy
The main advantage of trading using opposite Microsoft and Clean Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Clean Energy 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 Clean Energy will offset losses from the drop in Clean Energy's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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