Correlation Between Microsoft and CP ALL
Can any of the company-specific risk be diversified away by investing in both Microsoft and CP ALL 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 CP ALL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and CP ALL Public, you can compare the effects of market volatilities on Microsoft and CP ALL 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 CP ALL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and CP ALL.
Diversification Opportunities for Microsoft and CP ALL
Very good diversification
The 3 months correlation between Microsoft and CVPBF is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and CP ALL Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CP ALL Public 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 CP ALL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CP ALL Public has no effect on the direction of Microsoft i.e., Microsoft and CP ALL go up and down completely randomly.
Pair Corralation between Microsoft and CP ALL
Given the investment horizon of 90 days Microsoft is expected to generate 0.35 times more return on investment than CP ALL. However, Microsoft is 2.86 times less risky than CP ALL. It trades about -0.2 of its potential returns per unit of risk. CP ALL Public is currently generating about -0.22 per unit of risk. If you would invest 43,369 in Microsoft on November 27, 2024 and sell it today you would lose (2,969) from holding Microsoft or give up 6.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. CP ALL Public
Performance |
| Timeline |
| Microsoft |
| CP ALL Public |
Microsoft and CP ALL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and CP ALL
The main advantage of trading using opposite Microsoft and CP ALL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, CP ALL 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 CP ALL will offset losses from the drop in CP ALL's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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