Correlation Between Microsoft and HCI
Can any of the company-specific risk be diversified away by investing in both Microsoft and HCI 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 HCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and HCI Group, you can compare the effects of market volatilities on Microsoft and HCI 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 HCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and HCI.
Diversification Opportunities for Microsoft and HCI
Modest diversification
The 3 months correlation between Microsoft and HCI is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and HCI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCI Group 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 HCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCI Group has no effect on the direction of Microsoft i.e., Microsoft and HCI go up and down completely randomly.
Pair Corralation between Microsoft and HCI
Given the investment horizon of 90 days Microsoft is expected to generate 0.87 times more return on investment than HCI. However, Microsoft is 1.15 times less risky than HCI. It trades about 0.02 of its potential returns per unit of risk. HCI Group is currently generating about 0.0 per unit of risk. If you would invest 42,574 in Microsoft on August 29, 2024 and sell it today you would earn a total of 225.00 from holding Microsoft or generate 0.53% 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. HCI Group
Performance |
| Timeline |
| Microsoft |
| HCI Group |
Microsoft and HCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and HCI
The main advantage of trading using opposite Microsoft and HCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, HCI 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 HCI will offset losses from the drop in HCI's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| HCI vs. Universal Insurance Holdings | HCI vs. Kingstone Companies | HCI vs. Horace Mann Educators | HCI vs. Heritage Insurance Hldgs |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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