Correlation Between Microsoft and East Side
Can any of the company-specific risk be diversified away by investing in both Microsoft and East Side 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 East Side into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and East Side Games, you can compare the effects of market volatilities on Microsoft and East Side 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 East Side. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and East Side.
Diversification Opportunities for Microsoft and East Side
Modest diversification
The 3 months correlation between Microsoft and East is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and East Side Games in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East Side Games 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 East Side. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East Side Games has no effect on the direction of Microsoft i.e., Microsoft and East Side go up and down completely randomly.
Pair Corralation between Microsoft and East Side
Given the investment horizon of 90 days Microsoft is expected to generate 0.45 times more return on investment than East Side. However, Microsoft is 2.24 times less risky than East Side. It trades about -0.11 of its potential returns per unit of risk. East Side Games is currently generating about -0.19 per unit of risk. If you would invest 42,903 in Microsoft on November 18, 2024 and sell it today you would lose (2,060) from holding Microsoft or give up 4.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Microsoft vs. East Side Games
Performance |
| Timeline |
| Microsoft |
| East Side Games |
Microsoft and East Side Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and East Side
The main advantage of trading using opposite Microsoft and East Side positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, East Side 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 East Side will offset losses from the drop in East Side's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| East Side vs. Sangoma Technologies Corp | East Side vs. Vitalhub Corp | East Side vs. Propel Holdings | East Side vs. D2L 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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