Correlation Between Microsoft and Euronet Worldwide
Can any of the company-specific risk be diversified away by investing in both Microsoft and Euronet Worldwide 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 Euronet Worldwide into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Euronet Worldwide, you can compare the effects of market volatilities on Microsoft and Euronet Worldwide 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 Euronet Worldwide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Euronet Worldwide.
Diversification Opportunities for Microsoft and Euronet Worldwide
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Euronet is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Euronet Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Euronet Worldwide 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 Euronet Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Euronet Worldwide has no effect on the direction of Microsoft i.e., Microsoft and Euronet Worldwide go up and down completely randomly.
Pair Corralation between Microsoft and Euronet Worldwide
Given the investment horizon of 90 days Microsoft is expected to generate 0.68 times more return on investment than Euronet Worldwide. However, Microsoft is 1.48 times less risky than Euronet Worldwide. It trades about 0.06 of its potential returns per unit of risk. Euronet Worldwide is currently generating about 0.0 per unit of risk. If you would invest 32,151 in Microsoft on August 31, 2024 and sell it today you would earn a total of 10,195 from holding Microsoft or generate 31.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Euronet Worldwide
Performance |
| Timeline |
| Microsoft |
| Euronet Worldwide |
Microsoft and Euronet Worldwide Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Euronet Worldwide
The main advantage of trading using opposite Microsoft and Euronet Worldwide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Euronet Worldwide 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 Euronet Worldwide will offset losses from the drop in Euronet Worldwide's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Euronet Worldwide vs. Evertec | Euronet Worldwide vs. i3 Verticals | Euronet Worldwide vs. EverCommerce | Euronet Worldwide vs. NetScout Systems |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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