Correlation Between Microsoft and Enerpac Tool
Can any of the company-specific risk be diversified away by investing in both Microsoft and Enerpac Tool 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 Enerpac Tool into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Enerpac Tool Group, you can compare the effects of market volatilities on Microsoft and Enerpac Tool 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 Enerpac Tool. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Enerpac Tool.
Diversification Opportunities for Microsoft and Enerpac Tool
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Enerpac is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Enerpac Tool Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enerpac Tool Group 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 Enerpac Tool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enerpac Tool Group has no effect on the direction of Microsoft i.e., Microsoft and Enerpac Tool go up and down completely randomly.
Pair Corralation between Microsoft and Enerpac Tool
Given the investment horizon of 90 days Microsoft is expected to generate 1.29 times less return on investment than Enerpac Tool. But when comparing it to its historical volatility, Microsoft is 1.22 times less risky than Enerpac Tool. It trades about 0.08 of its potential returns per unit of risk. Enerpac Tool Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,427 in Enerpac Tool Group on August 27, 2024 and sell it today you would earn a total of 2,447 from holding Enerpac Tool Group or generate 100.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Enerpac Tool Group
Performance |
| Timeline |
| Microsoft |
| Enerpac Tool Group |
Microsoft and Enerpac Tool Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Enerpac Tool
The main advantage of trading using opposite Microsoft and Enerpac Tool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Enerpac Tool 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 Enerpac Tool will offset losses from the drop in Enerpac Tool's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Rapid7 Inc |
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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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