Correlation Between Microsoft and Haleon PLC
Can any of the company-specific risk be diversified away by investing in both Microsoft and Haleon 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 Haleon PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Haleon PLC, you can compare the effects of market volatilities on Microsoft and Haleon 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 Haleon PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Haleon PLC.
Diversification Opportunities for Microsoft and Haleon PLC
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Microsoft and Haleon is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Haleon PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haleon 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 Haleon PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haleon PLC has no effect on the direction of Microsoft i.e., Microsoft and Haleon PLC go up and down completely randomly.
Pair Corralation between Microsoft and Haleon PLC
Given the investment horizon of 90 days Microsoft is expected to generate 1.01 times more return on investment than Haleon PLC. However, Microsoft is 1.01 times more volatile than Haleon PLC. It trades about 0.19 of its potential returns per unit of risk. Haleon PLC is currently generating about 0.01 per unit of risk. If you would invest 40,554 in Microsoft on September 1, 2024 and sell it today you would earn a total of 1,792 from holding Microsoft or generate 4.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
Microsoft vs. Haleon PLC
Performance |
| Timeline |
| Microsoft |
| Haleon PLC |
Microsoft and Haleon PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Haleon PLC
The main advantage of trading using opposite Microsoft and Haleon PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Haleon 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 Haleon PLC will offset losses from the drop in Haleon PLC's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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