Correlation Between Microsoft and Elah Holdings
Can any of the company-specific risk be diversified away by investing in both Microsoft and Elah Holdings 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 Elah Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Elah Holdings, you can compare the effects of market volatilities on Microsoft and Elah Holdings 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 Elah Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Elah Holdings.
Diversification Opportunities for Microsoft and Elah Holdings
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Elah is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Elah Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elah Holdings 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 Elah Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elah Holdings has no effect on the direction of Microsoft i.e., Microsoft and Elah Holdings go up and down completely randomly.
Pair Corralation between Microsoft and Elah Holdings
Given the investment horizon of 90 days Microsoft is expected to generate 0.09 times more return on investment than Elah Holdings. However, Microsoft is 10.78 times less risky than Elah Holdings. It trades about 0.43 of its potential returns per unit of risk. Elah Holdings is currently generating about 0.0 per unit of risk. If you would invest 41,417 in Microsoft on September 16, 2024 and sell it today you would earn a total of 3,310 from holding Microsoft or generate 7.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Elah Holdings
Performance |
| Timeline |
| Microsoft |
| Elah Holdings |
Microsoft and Elah Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Elah Holdings
The main advantage of trading using opposite Microsoft and Elah Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Elah Holdings 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 Elah Holdings will offset losses from the drop in Elah Holdings' long position.| Microsoft vs. Global Blue Group | Microsoft vs. Aurora Mobile | Microsoft vs. Marqeta | Microsoft vs. Nextnav Acquisition Corp |
| Elah Holdings vs. Advantage Solutions | Elah Holdings vs. Atlas Corp | Elah Holdings vs. PureCycle Technologies | Elah Holdings vs. WM Technology |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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