Correlation Between Microsoft and Ceres Global
Can any of the company-specific risk be diversified away by investing in both Microsoft and Ceres Global 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 Ceres Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Ceres Global Ag, you can compare the effects of market volatilities on Microsoft and Ceres Global 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 Ceres Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Ceres Global.
Diversification Opportunities for Microsoft and Ceres Global
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Ceres is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Ceres Global Ag in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ceres Global Ag 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 Ceres Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ceres Global Ag has no effect on the direction of Microsoft i.e., Microsoft and Ceres Global go up and down completely randomly.
Pair Corralation between Microsoft and Ceres Global
Given the investment horizon of 90 days Microsoft is expected to generate 0.79 times more return on investment than Ceres Global. However, Microsoft is 1.26 times less risky than Ceres Global. It trades about -0.04 of its potential returns per unit of risk. Ceres Global Ag is currently generating about -0.18 per unit of risk. If you would invest 43,167 in Microsoft on August 31, 2024 and sell it today you would lose (868.00) from holding Microsoft or give up 2.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Ceres Global Ag
Performance |
| Timeline |
| Microsoft |
| Ceres Global Ag |
Microsoft and Ceres Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Ceres Global
The main advantage of trading using opposite Microsoft and Ceres Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Ceres Global 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 Ceres Global will offset losses from the drop in Ceres Global's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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