Correlation Between Microsoft and Daimler Truck
Can any of the company-specific risk be diversified away by investing in both Microsoft and Daimler Truck 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 Daimler Truck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Daimler Truck Holding, you can compare the effects of market volatilities on Microsoft and Daimler Truck 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 Daimler Truck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Daimler Truck.
Diversification Opportunities for Microsoft and Daimler Truck
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Daimler is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Daimler Truck Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daimler Truck Holding 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 Daimler Truck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daimler Truck Holding has no effect on the direction of Microsoft i.e., Microsoft and Daimler Truck go up and down completely randomly.
Pair Corralation between Microsoft and Daimler Truck
Given the investment horizon of 90 days Microsoft is expected to generate 0.64 times more return on investment than Daimler Truck. However, Microsoft is 1.56 times less risky than Daimler Truck. It trades about 0.17 of its potential returns per unit of risk. Daimler Truck Holding is currently generating about 0.05 per unit of risk. If you would invest 41,879 in Microsoft on September 24, 2024 and sell it today you would earn a total of 1,781 from holding Microsoft or generate 4.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Microsoft vs. Daimler Truck Holding
Performance |
| Timeline |
| Microsoft |
| Daimler Truck Holding |
Microsoft and Daimler Truck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Daimler Truck
The main advantage of trading using opposite Microsoft and Daimler Truck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Daimler Truck 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 Daimler Truck will offset losses from the drop in Daimler Truck's long position.| Microsoft vs. BlackBerry | Microsoft vs. Global Blue Group | Microsoft vs. Aurora Mobile | Microsoft vs. Marqeta |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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