Correlation Between Microsoft and Energisa
Can any of the company-specific risk be diversified away by investing in both Microsoft and Energisa 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 Energisa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Energisa SA, you can compare the effects of market volatilities on Microsoft and Energisa 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 Energisa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Energisa.
Diversification Opportunities for Microsoft and Energisa
Good diversification
The 3 months correlation between Microsoft and Energisa is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Energisa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energisa SA 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 Energisa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energisa SA has no effect on the direction of Microsoft i.e., Microsoft and Energisa go up and down completely randomly.
Pair Corralation between Microsoft and Energisa
Given the investment horizon of 90 days Microsoft is expected to generate 0.58 times more return on investment than Energisa. However, Microsoft is 1.72 times less risky than Energisa. It trades about 0.08 of its potential returns per unit of risk. Energisa SA is currently generating about 0.01 per unit of risk. If you would invest 24,843 in Microsoft on September 2, 2024 and sell it today you would earn a total of 17,503 from holding Microsoft or generate 70.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.0% |
| Values | Daily Returns |
Microsoft vs. Energisa SA
Performance |
| Timeline |
| Microsoft |
| Energisa SA |
Microsoft and Energisa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Energisa
The main advantage of trading using opposite Microsoft and Energisa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Energisa 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 Energisa will offset losses from the drop in Energisa's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Energisa vs. Energisa SA | Energisa vs. Equatorial Energia SA | Energisa vs. Energisa SA | Energisa vs. Transmissora Aliana de |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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