Correlation Between Microsoft and DUSK
Can any of the company-specific risk be diversified away by investing in both Microsoft and DUSK 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 DUSK into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and DUSK, you can compare the effects of market volatilities on Microsoft and DUSK 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 DUSK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and DUSK.
Diversification Opportunities for Microsoft and DUSK
Modest diversification
The 3 months correlation between Microsoft and DUSK is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and DUSK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DUSK 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 DUSK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DUSK has no effect on the direction of Microsoft i.e., Microsoft and DUSK go up and down completely randomly.
Pair Corralation between Microsoft and DUSK
Given the investment horizon of 90 days Microsoft is expected to under-perform the DUSK. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 3.05 times less risky than DUSK. The stock trades about -0.06 of its potential returns per unit of risk. The DUSK is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 16.00 in DUSK on August 26, 2024 and sell it today you would earn a total of 5.00 from holding DUSK or generate 31.25% 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. DUSK
Performance |
| Timeline |
| Microsoft |
| DUSK |
Microsoft and DUSK Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and DUSK
The main advantage of trading using opposite Microsoft and DUSK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, DUSK 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 DUSK will offset losses from the drop in DUSK's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Rapid7 Inc |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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