Correlation Between Microsoft and DeFi Technologies
Can any of the company-specific risk be diversified away by investing in both Microsoft and DeFi Technologies 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 DeFi Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and DeFi Technologies, you can compare the effects of market volatilities on Microsoft and DeFi Technologies 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 DeFi Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and DeFi Technologies.
Diversification Opportunities for Microsoft and DeFi Technologies
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and DeFi is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and DeFi Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DeFi Technologies 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 DeFi Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DeFi Technologies has no effect on the direction of Microsoft i.e., Microsoft and DeFi Technologies go up and down completely randomly.
Pair Corralation between Microsoft and DeFi Technologies
Given the investment horizon of 90 days Microsoft is expected to under-perform the DeFi Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 5.41 times less risky than DeFi Technologies. The stock trades about -0.07 of its potential returns per unit of risk. The DeFi Technologies is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 397.00 in DeFi Technologies on October 24, 2024 and sell it today you would earn a total of 50.00 from holding DeFi Technologies or generate 12.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 90.0% |
| Values | Daily Returns |
Microsoft vs. DeFi Technologies
Performance |
| Timeline |
| Microsoft |
| DeFi Technologies |
Microsoft and DeFi Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and DeFi Technologies
The main advantage of trading using opposite Microsoft and DeFi Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, DeFi Technologies 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 DeFi Technologies will offset losses from the drop in DeFi Technologies' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. BLOCK INC | Microsoft vs. Adobe Systems Incorporated |
| DeFi Technologies vs. BluMetric Environmental | DeFi Technologies vs. Pace Metals | DeFi Technologies vs. Partners Value Investments | DeFi Technologies vs. DIRTT Environmental Solutions |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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