Correlation Between Microsoft and Torrid Holdings
Can any of the company-specific risk be diversified away by investing in both Microsoft and Torrid Holdings 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 Torrid Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Torrid Holdings, you can compare the effects of market volatilities on Microsoft and Torrid Holdings 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 Torrid Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Torrid Holdings.
Diversification Opportunities for Microsoft and Torrid Holdings
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Torrid is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Torrid Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Torrid Holdings 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 Torrid Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Torrid Holdings has no effect on the direction of Microsoft i.e., Microsoft and Torrid Holdings go up and down completely randomly.
Pair Corralation between Microsoft and Torrid Holdings
Given the investment horizon of 90 days Microsoft is expected to under-perform the Torrid Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.68 times less risky than Torrid Holdings. The stock trades about -0.04 of its potential returns per unit of risk. The Torrid Holdings is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 350.00 in Torrid Holdings on August 28, 2024 and sell it today you would earn a total of 66.00 from holding Torrid Holdings or generate 18.86% 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. Torrid Holdings
Performance |
| Timeline |
| Microsoft |
| Torrid Holdings |
Microsoft and Torrid Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Torrid Holdings
The main advantage of trading using opposite Microsoft and Torrid Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Torrid Holdings 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 Torrid Holdings will offset losses from the drop in Torrid Holdings' long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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