Correlation Between Microsoft and Hashicorp
Can any of the company-specific risk be diversified away by investing in both Microsoft and Hashicorp 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 Hashicorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Hashicorp, you can compare the effects of market volatilities on Microsoft and Hashicorp 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 Hashicorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Hashicorp.
Diversification Opportunities for Microsoft and Hashicorp
Modest diversification
The 3 months correlation between Microsoft and Hashicorp is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Hashicorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hashicorp 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 Hashicorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hashicorp has no effect on the direction of Microsoft i.e., Microsoft and Hashicorp go up and down completely randomly.
Pair Corralation between Microsoft and Hashicorp
Given the investment horizon of 90 days Microsoft is expected to generate 0.45 times more return on investment than Hashicorp. However, Microsoft is 2.24 times less risky than Hashicorp. It trades about 0.08 of its potential returns per unit of risk. Hashicorp is currently generating about 0.03 per unit of risk. If you would invest 24,616 in Microsoft on August 24, 2024 and sell it today you would earn a total of 16,632 from holding Microsoft or generate 67.57% 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. Hashicorp
Performance |
| Timeline |
| Microsoft |
| Hashicorp |
Microsoft and Hashicorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Hashicorp
The main advantage of trading using opposite Microsoft and Hashicorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Hashicorp 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 Hashicorp will offset losses from the drop in Hashicorp'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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity |