Correlation Between Microsoft and Edwards Lifesciences
Can any of the company-specific risk be diversified away by investing in both Microsoft and Edwards Lifesciences 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 Edwards Lifesciences into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Edwards Lifesciences Corp, you can compare the effects of market volatilities on Microsoft and Edwards Lifesciences 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 Edwards Lifesciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Edwards Lifesciences.
Diversification Opportunities for Microsoft and Edwards Lifesciences
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Edwards is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Edwards Lifesciences Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edwards Lifesciences 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 Edwards Lifesciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edwards Lifesciences Corp has no effect on the direction of Microsoft i.e., Microsoft and Edwards Lifesciences go up and down completely randomly.
Pair Corralation between Microsoft and Edwards Lifesciences
Given the investment horizon of 90 days Microsoft is expected to generate 0.65 times more return on investment than Edwards Lifesciences. However, Microsoft is 1.54 times less risky than Edwards Lifesciences. It trades about 0.08 of its potential returns per unit of risk. Edwards Lifesciences Corp is currently generating about 0.01 per unit of risk. If you would invest 24,042 in Microsoft on August 28, 2024 and sell it today you would earn a total of 17,837 from holding Microsoft or generate 74.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Edwards Lifesciences Corp
Performance |
| Timeline |
| Microsoft |
| Edwards Lifesciences Corp |
Microsoft and Edwards Lifesciences Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Edwards Lifesciences
The main advantage of trading using opposite Microsoft and Edwards Lifesciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Edwards Lifesciences 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 Edwards Lifesciences will offset losses from the drop in Edwards Lifesciences' long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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