Correlation Between Microsoft and H M
Can any of the company-specific risk be diversified away by investing in both Microsoft and H M 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 M into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and H M Hennes, you can compare the effects of market volatilities on Microsoft and H M 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 M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and H M.
Diversification Opportunities for Microsoft and H M
Modest diversification
The 3 months correlation between Microsoft and HMRZF is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and H M Hennes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H M Hennes 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 M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H M Hennes has no effect on the direction of Microsoft i.e., Microsoft and H M go up and down completely randomly.
Pair Corralation between Microsoft and H M
Given the investment horizon of 90 days Microsoft is expected to generate 0.68 times more return on investment than H M. However, Microsoft is 1.46 times less risky than H M. It trades about -0.04 of its potential returns per unit of risk. H M Hennes is currently generating about -0.2 per unit of risk. If you would invest 43,109 in Microsoft on August 30, 2024 and sell it today you would lose (810.00) from holding Microsoft or give up 1.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Microsoft vs. H M Hennes
Performance |
| Timeline |
| Microsoft |
| H M Hennes |
Microsoft and H M Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and H M
The main advantage of trading using opposite Microsoft and H M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, H M 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 M will offset losses from the drop in H M's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| H M vs. Superior Uniform Group | H M vs. Lakeland Industries | H M vs. Jerash Holdings | H M vs. G III Apparel Group |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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