Correlation Between Microsoft and Crescent Steel
Can any of the company-specific risk be diversified away by investing in both Microsoft and Crescent Steel 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 Crescent Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Crescent Steel Allied, you can compare the effects of market volatilities on Microsoft and Crescent Steel 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 Crescent Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Crescent Steel.
Diversification Opportunities for Microsoft and Crescent Steel
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Crescent is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Crescent Steel Allied in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescent Steel Allied 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 Crescent Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescent Steel Allied has no effect on the direction of Microsoft i.e., Microsoft and Crescent Steel go up and down completely randomly.
Pair Corralation between Microsoft and Crescent Steel
Given the investment horizon of 90 days Microsoft is expected to generate 0.35 times more return on investment than Crescent Steel. However, Microsoft is 2.84 times less risky than Crescent Steel. It trades about 0.06 of its potential returns per unit of risk. Crescent Steel Allied is currently generating about 0.02 per unit of risk. If you would invest 42,574 in Microsoft on October 26, 2024 and sell it today you would earn a total of 2,097 from holding Microsoft or generate 4.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.16% |
| Values | Daily Returns |
Microsoft vs. Crescent Steel Allied
Performance |
| Timeline |
| Microsoft |
| Crescent Steel Allied |
Microsoft and Crescent Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Crescent Steel
The main advantage of trading using opposite Microsoft and Crescent Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Crescent Steel 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 Crescent Steel will offset losses from the drop in Crescent Steel'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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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