Correlation Between Microsoft and Ethema Health
Can any of the company-specific risk be diversified away by investing in both Microsoft and Ethema Health 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 Ethema Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Ethema Health Corp, you can compare the effects of market volatilities on Microsoft and Ethema Health 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 Ethema Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Ethema Health.
Diversification Opportunities for Microsoft and Ethema Health
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Ethema is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Ethema Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ethema Health 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 Ethema Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ethema Health Corp has no effect on the direction of Microsoft i.e., Microsoft and Ethema Health go up and down completely randomly.
Pair Corralation between Microsoft and Ethema Health
Given the investment horizon of 90 days Microsoft is expected to generate 0.18 times more return on investment than Ethema Health. However, Microsoft is 5.56 times less risky than Ethema Health. It trades about -0.04 of its potential returns per unit of risk. Ethema Health Corp is currently generating about -0.21 per unit of risk. If you would invest 43,109 in Microsoft on August 30, 2024 and sell it today you would lose (810.00) from holding Microsoft or give up 1.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Ethema Health Corp
Performance |
| Timeline |
| Microsoft |
| Ethema Health Corp |
Microsoft and Ethema Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Ethema Health
The main advantage of trading using opposite Microsoft and Ethema Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Ethema Health 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 Ethema Health will offset losses from the drop in Ethema Health's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Ethema Health vs. PayPal Holdings | Ethema Health vs. Nasdaq Inc | Ethema Health vs. Choice Hotels International | Ethema Health vs. Microsoft |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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