Correlation Between Microsoft and Hanover Foods
Can any of the company-specific risk be diversified away by investing in both Microsoft and Hanover Foods 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 Hanover Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Hanover Foods, you can compare the effects of market volatilities on Microsoft and Hanover Foods 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 Hanover Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Hanover Foods.
Diversification Opportunities for Microsoft and Hanover Foods
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Hanover is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Hanover Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Foods 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 Hanover Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanover Foods has no effect on the direction of Microsoft i.e., Microsoft and Hanover Foods go up and down completely randomly.
Pair Corralation between Microsoft and Hanover Foods
Given the investment horizon of 90 days Microsoft is expected to generate 1.71 times more return on investment than Hanover Foods. However, Microsoft is 1.71 times more volatile than Hanover Foods. It trades about 0.06 of its potential returns per unit of risk. Hanover Foods is currently generating about -0.01 per unit of risk. If you would invest 36,854 in Microsoft on September 4, 2024 and sell it today you would earn a total of 6,244 from holding Microsoft or generate 16.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 94.72% |
| Values | Daily Returns |
Microsoft vs. Hanover Foods
Performance |
| Timeline |
| Microsoft |
| Hanover Foods |
Microsoft and Hanover Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Hanover Foods
The main advantage of trading using opposite Microsoft and Hanover Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Hanover Foods 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 Hanover Foods will offset losses from the drop in Hanover Foods' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Hanover Foods vs. Arrow Financial | Hanover Foods vs. Siriuspoint | Hanover Foods vs. LithiumBank Resources Corp | Hanover Foods vs. Academy Sports Outdoors |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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