Correlation Between Microsoft and Frost Low
Can any of the company-specific risk be diversified away by investing in both Microsoft and Frost Low 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 Frost Low into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Frost Low Duration, you can compare the effects of market volatilities on Microsoft and Frost Low 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 Frost Low. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Frost Low.
Diversification Opportunities for Microsoft and Frost Low
Weak diversification
The 3 months correlation between Microsoft and Frost is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Frost Low Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frost Low Duration 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 Frost Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frost Low Duration has no effect on the direction of Microsoft i.e., Microsoft and Frost Low go up and down completely randomly.
Pair Corralation between Microsoft and Frost Low
Given the investment horizon of 90 days Microsoft is expected to generate 10.17 times more return on investment than Frost Low. However, Microsoft is 10.17 times more volatile than Frost Low Duration. It trades about 0.08 of its potential returns per unit of risk. Frost Low Duration is currently generating about 0.14 per unit of risk. If you would invest 25,277 in Microsoft on September 3, 2024 and sell it today you would earn a total of 17,069 from holding Microsoft or generate 67.53% 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. Frost Low Duration
Performance |
| Timeline |
| Microsoft |
| Frost Low Duration |
Microsoft and Frost Low Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Frost Low
The main advantage of trading using opposite Microsoft and Frost Low positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Frost Low 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 Frost Low will offset losses from the drop in Frost Low's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Frost Low vs. Calvert Global Energy | Frost Low vs. Firsthand Alternative Energy | Frost Low vs. Hennessy Bp Energy | Frost Low vs. Adams Natural Resources |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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