Correlation Between Microsoft and Deutz AG
Can any of the company-specific risk be diversified away by investing in both Microsoft and Deutz AG 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 Deutz AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Deutz AG, you can compare the effects of market volatilities on Microsoft and Deutz AG 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 Deutz AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Deutz AG.
Diversification Opportunities for Microsoft and Deutz AG
Modest diversification
The 3 months correlation between Microsoft and Deutz is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Deutz AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutz AG 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 Deutz AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutz AG has no effect on the direction of Microsoft i.e., Microsoft and Deutz AG go up and down completely randomly.
Pair Corralation between Microsoft and Deutz AG
Given the investment horizon of 90 days Microsoft is expected to generate 0.99 times more return on investment than Deutz AG. However, Microsoft is 1.01 times less risky than Deutz AG. It trades about 0.32 of its potential returns per unit of risk. Deutz AG is currently generating about 0.17 per unit of risk. If you would invest 42,218 in Microsoft on September 13, 2024 and sell it today you would earn a total of 3,249 from holding Microsoft or generate 7.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Deutz AG
Performance |
| Timeline |
| Microsoft |
| Deutz AG |
Microsoft and Deutz AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Deutz AG
The main advantage of trading using opposite Microsoft and Deutz AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Deutz AG 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 Deutz AG will offset losses from the drop in Deutz AG's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Deutz AG vs. Auto Trader Group | Deutz AG vs. PennyMac Mortgage Investment | Deutz AG vs. CarsalesCom | Deutz AG vs. AGNC INVESTMENT |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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