Correlation Between Microsoft and Cricut
Can any of the company-specific risk be diversified away by investing in both Microsoft and Cricut 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 Cricut into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Cricut Inc, you can compare the effects of market volatilities on Microsoft and Cricut 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 Cricut. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Cricut.
Diversification Opportunities for Microsoft and Cricut
Weak diversification
The 3 months correlation between Microsoft and Cricut is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Cricut Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cricut Inc 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 Cricut. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cricut Inc has no effect on the direction of Microsoft i.e., Microsoft and Cricut go up and down completely randomly.
Pair Corralation between Microsoft and Cricut
Given the investment horizon of 90 days Microsoft is expected to generate 0.32 times more return on investment than Cricut. However, Microsoft is 3.08 times less risky than Cricut. It trades about 0.06 of its potential returns per unit of risk. Cricut Inc is currently generating about -0.04 per unit of risk. If you would invest 32,151 in Microsoft on August 31, 2024 and sell it today you would earn a total of 10,195 from holding Microsoft or generate 31.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Cricut Inc
Performance |
| Timeline |
| Microsoft |
| Cricut Inc |
Microsoft and Cricut Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Cricut
The main advantage of trading using opposite Microsoft and Cricut positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Cricut 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 Cricut will offset losses from the drop in Cricut's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Cricut vs. Nano Dimension | Cricut vs. 3D Systems | Cricut vs. Markforged Holding Corp | Cricut vs. Stratasys |
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 CEOs Directory module to screen CEOs from public companies around the world.
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