Correlation Between Microsoft and Duke Energy
Can any of the company-specific risk be diversified away by investing in both Microsoft and Duke Energy 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 Duke Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Duke Energy, you can compare the effects of market volatilities on Microsoft and Duke Energy 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 Duke Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Duke Energy.
Diversification Opportunities for Microsoft and Duke Energy
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Duke is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Duke Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duke Energy 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 Duke Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duke Energy has no effect on the direction of Microsoft i.e., Microsoft and Duke Energy go up and down completely randomly.
Pair Corralation between Microsoft and Duke Energy
Given the investment horizon of 90 days Microsoft is expected to generate 1.47 times less return on investment than Duke Energy. In addition to that, Microsoft is 1.09 times more volatile than Duke Energy. It trades about 0.06 of its total potential returns per unit of risk. Duke Energy is currently generating about 0.1 per unit of volatility. If you would invest 7,882 in Duke Energy on September 14, 2024 and sell it today you would earn a total of 2,518 from holding Duke Energy or generate 31.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.18% |
| Values | Daily Returns |
Microsoft vs. Duke Energy
Performance |
| Timeline |
| Microsoft |
| Duke Energy |
Microsoft and Duke Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Duke Energy
The main advantage of trading using opposite Microsoft and Duke Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Duke Energy 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 Duke Energy will offset losses from the drop in Duke Energy's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Duke Energy vs. WEC Energy Group | Duke Energy vs. ENDESA ADR 12 | Duke Energy vs. CMS Energy | Duke Energy vs. Terna Rete |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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