Correlation Between Microsoft and H-D International
Can any of the company-specific risk be diversified away by investing in both Microsoft and H-D International 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 H-D International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and H D International Holdings, you can compare the effects of market volatilities on Microsoft and H-D International 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 H-D International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and H-D International.
Diversification Opportunities for Microsoft and H-D International
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and H-D is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and H D International Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H D International 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 H-D International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H D International has no effect on the direction of Microsoft i.e., Microsoft and H-D International go up and down completely randomly.
Pair Corralation between Microsoft and H-D International
Given the investment horizon of 90 days Microsoft is expected to generate 3.57 times less return on investment than H-D International. But when comparing it to its historical volatility, Microsoft is 11.43 times less risky than H-D International. It trades about 0.19 of its potential returns per unit of risk. H D International Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 0.02 in H D International Holdings on September 1, 2024 and sell it today you would earn a total of 0.00 from holding H D International Holdings or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Microsoft vs. H D International Holdings
Performance |
| Timeline |
| Microsoft |
| H D International |
Microsoft and H-D International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and H-D International
The main advantage of trading using opposite Microsoft and H-D International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, H-D International 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 H-D International will offset losses from the drop in H-D International's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| H-D International vs. Actelis Networks | H-D International vs. ClearOne | H-D International vs. Siyata Mobile | H-D International vs. SatixFy Communications |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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