Correlation Between Microsoft and Hammond Power
Can any of the company-specific risk be diversified away by investing in both Microsoft and Hammond Power 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 Hammond Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Hammond Power Solutions, you can compare the effects of market volatilities on Microsoft and Hammond Power 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 Hammond Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Hammond Power.
Diversification Opportunities for Microsoft and Hammond Power
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Hammond is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Hammond Power Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hammond Power Solutions 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 Hammond Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hammond Power Solutions has no effect on the direction of Microsoft i.e., Microsoft and Hammond Power go up and down completely randomly.
Pair Corralation between Microsoft and Hammond Power
Given the investment horizon of 90 days Microsoft is expected to generate 0.59 times more return on investment than Hammond Power. However, Microsoft is 1.7 times less risky than Hammond Power. It trades about -0.04 of its potential returns per unit of risk. Hammond Power Solutions is currently generating about -0.21 per unit of risk. If you would invest 42,335 in Microsoft on November 4, 2024 and sell it today you would lose (829.00) from holding Microsoft or give up 1.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 90.91% |
| Values | Daily Returns |
Microsoft vs. Hammond Power Solutions
Performance |
| Timeline |
| Microsoft |
| Hammond Power Solutions |
Microsoft and Hammond Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Hammond Power
The main advantage of trading using opposite Microsoft and Hammond Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Hammond Power 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 Hammond Power will offset losses from the drop in Hammond Power's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| Hammond Power vs. Hammond Manufacturing | Hammond Power vs. Firan Technology Group | Hammond Power vs. Supremex | Hammond Power vs. Geodrill Limited |
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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