Correlation Between Microsoft and Edgewell Personal
Can any of the company-specific risk be diversified away by investing in both Microsoft and Edgewell Personal 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 Edgewell Personal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Edgewell Personal Care, you can compare the effects of market volatilities on Microsoft and Edgewell Personal 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 Edgewell Personal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Edgewell Personal.
Diversification Opportunities for Microsoft and Edgewell Personal
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and Edgewell is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Edgewell Personal Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edgewell Personal Care 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 Edgewell Personal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edgewell Personal Care has no effect on the direction of Microsoft i.e., Microsoft and Edgewell Personal go up and down completely randomly.
Pair Corralation between Microsoft and Edgewell Personal
Given the investment horizon of 90 days Microsoft is expected to generate 0.75 times more return on investment than Edgewell Personal. However, Microsoft is 1.34 times less risky than Edgewell Personal. It trades about -0.11 of its potential returns per unit of risk. Edgewell Personal Care is currently generating about -0.22 per unit of risk. If you would invest 42,903 in Microsoft on November 18, 2024 and sell it today you would lose (2,060) from holding Microsoft or give up 4.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Edgewell Personal Care
Performance |
| Timeline |
| Microsoft |
| Edgewell Personal Care |
Microsoft and Edgewell Personal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Edgewell Personal
The main advantage of trading using opposite Microsoft and Edgewell Personal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Edgewell Personal 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 Edgewell Personal will offset losses from the drop in Edgewell Personal's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| Edgewell Personal vs. Mannatech Incorporated | Edgewell Personal vs. Inter Parfums | Edgewell Personal vs. Nu Skin Enterprises | Edgewell Personal vs. Helen of Troy |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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