Correlation Between Microsoft and Hodges Small
Can any of the company-specific risk be diversified away by investing in both Microsoft and Hodges Small 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 Hodges Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Hodges Small Cap, you can compare the effects of market volatilities on Microsoft and Hodges Small 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 Hodges Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Hodges Small.
Diversification Opportunities for Microsoft and Hodges Small
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Hodges is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Hodges Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hodges Small Cap 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 Hodges Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hodges Small Cap has no effect on the direction of Microsoft i.e., Microsoft and Hodges Small go up and down completely randomly.
Pair Corralation between Microsoft and Hodges Small
Given the investment horizon of 90 days Microsoft is expected to generate 1.03 times more return on investment than Hodges Small. However, Microsoft is 1.03 times more volatile than Hodges Small Cap. It trades about 0.08 of its potential returns per unit of risk. Hodges Small Cap is currently generating about 0.05 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 17,084 from holding Microsoft or generate 69.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Hodges Small Cap
Performance |
| Timeline |
| Microsoft |
| Hodges Small Cap |
Microsoft and Hodges Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Hodges Small
The main advantage of trading using opposite Microsoft and Hodges Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Hodges Small 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 Hodges Small will offset losses from the drop in Hodges Small's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Hodges Small vs. Hodges Fund Retail | Hodges Small vs. Amg Southernsun Small | Hodges Small vs. Brown Advisory Growth | Hodges Small vs. Eventide Gilead Fund |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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