Correlation Between Microsoft and Danaher
Can any of the company-specific risk be diversified away by investing in both Microsoft and Danaher 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 Danaher into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Danaher, you can compare the effects of market volatilities on Microsoft and Danaher 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 Danaher. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Danaher.
Diversification Opportunities for Microsoft and Danaher
Average diversification
The 3 months correlation between Microsoft and Danaher is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Danaher in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danaher 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 Danaher. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danaher has no effect on the direction of Microsoft i.e., Microsoft and Danaher go up and down completely randomly.
Pair Corralation between Microsoft and Danaher
Given the investment horizon of 90 days Microsoft is expected to generate 0.98 times more return on investment than Danaher. However, Microsoft is 1.02 times less risky than Danaher. It trades about 0.08 of its potential returns per unit of risk. Danaher is currently generating about 0.01 per unit of risk. If you would invest 24,116 in Microsoft on August 27, 2024 and sell it today you would earn a total of 17,584 from holding Microsoft or generate 72.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Danaher
Performance |
| Timeline |
| Microsoft |
| Danaher |
Microsoft and Danaher Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Danaher
The main advantage of trading using opposite Microsoft and Danaher positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Danaher 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 Danaher will offset losses from the drop in Danaher's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| Danaher vs. Heartbeam | Danaher vs. EUDA Health Holdings | Danaher vs. Nutex Health | Danaher vs. Healthcare Triangle |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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