Correlation Between Microsoft and Enbridge
Can any of the company-specific risk be diversified away by investing in both Microsoft and Enbridge 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 Enbridge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Enbridge, you can compare the effects of market volatilities on Microsoft and Enbridge 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 Enbridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Enbridge.
Diversification Opportunities for Microsoft and Enbridge
Good diversification
The 3 months correlation between Microsoft and Enbridge is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge 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 Enbridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge has no effect on the direction of Microsoft i.e., Microsoft and Enbridge go up and down completely randomly.
Pair Corralation between Microsoft and Enbridge
Given the investment horizon of 90 days Microsoft is expected to generate 12.21 times less return on investment than Enbridge. In addition to that, Microsoft is 1.36 times more volatile than Enbridge. It trades about 0.02 of its total potential returns per unit of risk. Enbridge is currently generating about 0.37 per unit of volatility. If you would invest 3,704 in Enbridge on August 28, 2024 and sell it today you would earn a total of 400.00 from holding Enbridge or generate 10.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Enbridge
Performance |
| Timeline |
| Microsoft |
| Enbridge |
Microsoft and Enbridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Enbridge
The main advantage of trading using opposite Microsoft and Enbridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Enbridge 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 Enbridge will offset losses from the drop in Enbridge's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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