Correlation Between Microsoft and Everyday People
Can any of the company-specific risk be diversified away by investing in both Microsoft and Everyday People 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 Everyday People into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Everyday People Financial, you can compare the effects of market volatilities on Microsoft and Everyday People 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 Everyday People. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Everyday People.
Diversification Opportunities for Microsoft and Everyday People
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Everyday is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Everyday People Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everyday People Financial 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 Everyday People. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everyday People Financial has no effect on the direction of Microsoft i.e., Microsoft and Everyday People go up and down completely randomly.
Pair Corralation between Microsoft and Everyday People
Given the investment horizon of 90 days Microsoft is expected to under-perform the Everyday People. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.98 times less risky than Everyday People. The stock trades about -0.04 of its potential returns per unit of risk. The Everyday People Financial is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 38.00 in Everyday People Financial on August 31, 2024 and sell it today you would earn a total of 1.00 from holding Everyday People Financial or generate 2.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Everyday People Financial
Performance |
| Timeline |
| Microsoft |
| Everyday People Financial |
Microsoft and Everyday People Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Everyday People
The main advantage of trading using opposite Microsoft and Everyday People positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Everyday People 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 Everyday People will offset losses from the drop in Everyday People's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Everyday People vs. Quipt Home Medical | Everyday People vs. Medical Facilities | Everyday People vs. Dream Office Real | Everyday People vs. Cogeco Communications |
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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