Correlation Between Microsoft and ENB Financial
Can any of the company-specific risk be diversified away by investing in both Microsoft and ENB Financial 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 ENB Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and ENB Financial Corp, you can compare the effects of market volatilities on Microsoft and ENB Financial 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 ENB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and ENB Financial.
Diversification Opportunities for Microsoft and ENB Financial
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and ENB is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and ENB Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENB Financial Corp 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 ENB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENB Financial Corp has no effect on the direction of Microsoft i.e., Microsoft and ENB Financial go up and down completely randomly.
Pair Corralation between Microsoft and ENB Financial
Given the investment horizon of 90 days Microsoft is expected to generate 11.17 times less return on investment than ENB Financial. But when comparing it to its historical volatility, Microsoft is 2.17 times less risky than ENB Financial. It trades about 0.02 of its potential returns per unit of risk. ENB Financial Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,685 in ENB Financial Corp on August 29, 2024 and sell it today you would earn a total of 140.00 from holding ENB Financial Corp or generate 8.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. ENB Financial Corp
Performance |
| Timeline |
| Microsoft |
| ENB Financial Corp |
Microsoft and ENB Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and ENB Financial
The main advantage of trading using opposite Microsoft and ENB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, ENB Financial 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 ENB Financial will offset losses from the drop in ENB Financial's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| ENB Financial vs. Potomac Bancshares | ENB Financial vs. Apollo Bancorp | ENB Financial vs. The Farmers Bank | ENB Financial vs. 1ST SUMMIT BANCORP |
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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