Correlation Between Microsoft and ESS Tech
Can any of the company-specific risk be diversified away by investing in both Microsoft and ESS Tech 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 ESS Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and ESS Tech, you can compare the effects of market volatilities on Microsoft and ESS Tech 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 ESS Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and ESS Tech.
Diversification Opportunities for Microsoft and ESS Tech
Good diversification
The 3 months correlation between Microsoft and ESS is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and ESS Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESS Tech 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 ESS Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESS Tech has no effect on the direction of Microsoft i.e., Microsoft and ESS Tech go up and down completely randomly.
Pair Corralation between Microsoft and ESS Tech
Given the investment horizon of 90 days Microsoft is expected to generate 0.17 times more return on investment than ESS Tech. However, Microsoft is 5.97 times less risky than ESS Tech. It trades about -0.04 of its potential returns per unit of risk. ESS Tech is currently generating about -0.1 per unit of risk. If you would invest 42,574 in Microsoft on August 28, 2024 and sell it today you would lose (695.00) from holding Microsoft or give up 1.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. ESS Tech
Performance |
| Timeline |
| Microsoft |
| ESS Tech |
Microsoft and ESS Tech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and ESS Tech
The main advantage of trading using opposite Microsoft and ESS Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, ESS Tech 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 ESS Tech will offset losses from the drop in ESS Tech's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| ESS Tech vs. Fluence Energy | ESS Tech vs. Solid Power | ESS Tech vs. Eos Energy Enterprises | ESS Tech vs. FREYR Battery SA |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
Other Complementary Tools
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Fundamental Analysis View fundamental data based on most recent published financial statements |