Correlation Between Microsoft and CEMATRIX
Can any of the company-specific risk be diversified away by investing in both Microsoft and CEMATRIX 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 CEMATRIX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and CEMATRIX, you can compare the effects of market volatilities on Microsoft and CEMATRIX 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 CEMATRIX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and CEMATRIX.
Diversification Opportunities for Microsoft and CEMATRIX
Very good diversification
The 3 months correlation between Microsoft and CEMATRIX is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and CEMATRIX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEMATRIX 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 CEMATRIX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEMATRIX has no effect on the direction of Microsoft i.e., Microsoft and CEMATRIX go up and down completely randomly.
Pair Corralation between Microsoft and CEMATRIX
Given the investment horizon of 90 days Microsoft is expected to generate 1.4 times less return on investment than CEMATRIX. But when comparing it to its historical volatility, Microsoft is 3.41 times less risky than CEMATRIX. It trades about 0.07 of its potential returns per unit of risk. CEMATRIX is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 14.00 in CEMATRIX on November 5, 2024 and sell it today you would earn a total of 2.00 from holding CEMATRIX or generate 14.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Microsoft vs. CEMATRIX
Performance |
| Timeline |
| Microsoft |
| CEMATRIX |
Microsoft and CEMATRIX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and CEMATRIX
The main advantage of trading using opposite Microsoft and CEMATRIX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, CEMATRIX 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 CEMATRIX will offset losses from the drop in CEMATRIX's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| CEMATRIX vs. Tecnoglass | CEMATRIX vs. Xinyi Glass Holdings | CEMATRIX vs. Anhui Conch Cement | CEMATRIX vs. Basanite |
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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