Correlation Between Microsoft and Carrefour
Can any of the company-specific risk be diversified away by investing in both Microsoft and Carrefour 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 Carrefour into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Carrefour SA, you can compare the effects of market volatilities on Microsoft and Carrefour 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 Carrefour. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Carrefour.
Diversification Opportunities for Microsoft and Carrefour
Very good diversification
The 3 months correlation between Microsoft and Carrefour is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Carrefour SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carrefour SA 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 Carrefour. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carrefour SA has no effect on the direction of Microsoft i.e., Microsoft and Carrefour go up and down completely randomly.
Pair Corralation between Microsoft and Carrefour
Given the investment horizon of 90 days Microsoft is expected to under-perform the Carrefour. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.75 times less risky than Carrefour. The stock trades about -0.07 of its potential returns per unit of risk. The Carrefour SA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,362 in Carrefour SA on October 24, 2024 and sell it today you would earn a total of 57.00 from holding Carrefour SA or generate 4.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Carrefour SA
Performance |
| Timeline |
| Microsoft |
| Carrefour SA |
Microsoft and Carrefour Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Carrefour
The main advantage of trading using opposite Microsoft and Carrefour positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Carrefour 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 Carrefour will offset losses from the drop in Carrefour's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. BLOCK INC | Microsoft vs. Adobe Systems Incorporated |
| Carrefour vs. J Sainsbury plc | Carrefour vs. Om Holdings International | Carrefour vs. Carrefour SA PK | Carrefour vs. Kesko Oyj ADR |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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