Correlation Between Microsoft and Essentra Plc
Can any of the company-specific risk be diversified away by investing in both Microsoft and Essentra Plc 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 Essentra Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Essentra Plc, you can compare the effects of market volatilities on Microsoft and Essentra Plc 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 Essentra Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Essentra Plc.
Diversification Opportunities for Microsoft and Essentra Plc
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Microsoft and Essentra is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Essentra Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essentra Plc 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 Essentra Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essentra Plc has no effect on the direction of Microsoft i.e., Microsoft and Essentra Plc go up and down completely randomly.
Pair Corralation between Microsoft and Essentra Plc
Given the investment horizon of 90 days Microsoft is expected to generate 0.45 times more return on investment than Essentra Plc. However, Microsoft is 2.23 times less risky than Essentra Plc. It trades about 0.1 of its potential returns per unit of risk. Essentra Plc is currently generating about -0.03 per unit of risk. If you would invest 22,345 in Microsoft on August 31, 2024 and sell it today you would earn a total of 20,001 from holding Microsoft or generate 89.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 54.81% |
| Values | Daily Returns |
Microsoft vs. Essentra Plc
Performance |
| Timeline |
| Microsoft |
| Essentra Plc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Microsoft and Essentra Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Essentra Plc
The main advantage of trading using opposite Microsoft and Essentra Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Essentra Plc 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 Essentra Plc will offset losses from the drop in Essentra Plc's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Essentra Plc vs. LyondellBasell Industries NV | Essentra Plc vs. International Flavors Fragrances | Essentra Plc vs. Cabot | Essentra Plc vs. Westlake Chemical |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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