Correlation Between Microsoft and Cintas
Can any of the company-specific risk be diversified away by investing in both Microsoft and Cintas 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 Cintas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Cintas, you can compare the effects of market volatilities on Microsoft and Cintas 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 Cintas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Cintas.
Diversification Opportunities for Microsoft and Cintas
Average diversification
The 3 months correlation between Microsoft and Cintas is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Cintas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cintas 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 Cintas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cintas has no effect on the direction of Microsoft i.e., Microsoft and Cintas go up and down completely randomly.
Pair Corralation between Microsoft and Cintas
Given the investment horizon of 90 days Microsoft is expected to under-perform the Cintas. In addition to that, Microsoft is 1.26 times more volatile than Cintas. It trades about -0.05 of its total potential returns per unit of risk. Cintas is currently generating about 0.23 per unit of volatility. If you would invest 20,822 in Cintas on August 27, 2024 and sell it today you would earn a total of 1,354 from holding Cintas or generate 6.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Cintas
Performance |
| Timeline |
| Microsoft |
| Cintas |
Microsoft and Cintas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Cintas
The main advantage of trading using opposite Microsoft and Cintas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Cintas 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 Cintas will offset losses from the drop in Cintas' long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Rapid7 Inc |
| Cintas vs. ABM Industries Incorporated | Cintas vs. Copart Inc | Cintas vs. Dolby Laboratories | Cintas vs. Relx PLC 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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