Correlation Between Microsoft and Histogen
Can any of the company-specific risk be diversified away by investing in both Microsoft and Histogen 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 Histogen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Histogen, you can compare the effects of market volatilities on Microsoft and Histogen 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 Histogen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Histogen.
Diversification Opportunities for Microsoft and Histogen
Average diversification
The 3 months correlation between Microsoft and Histogen is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Histogen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Histogen 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 Histogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Histogen has no effect on the direction of Microsoft i.e., Microsoft and Histogen go up and down completely randomly.
Pair Corralation between Microsoft and Histogen
Given the investment horizon of 90 days Microsoft is expected to generate 0.08 times more return on investment than Histogen. However, Microsoft is 11.79 times less risky than Histogen. It trades about -0.01 of its potential returns per unit of risk. Histogen is currently generating about -0.14 per unit of risk. If you would invest 42,944 in Microsoft on August 29, 2024 and sell it today you would lose (558.00) from holding Microsoft or give up 1.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.67% |
| Values | Daily Returns |
Microsoft vs. Histogen
Performance |
| Timeline |
| Microsoft |
| Histogen |
Microsoft and Histogen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Histogen
The main advantage of trading using opposite Microsoft and Histogen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Histogen 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 Histogen will offset losses from the drop in Histogen's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Histogen vs. PayPal Holdings | Histogen vs. Nasdaq Inc | Histogen vs. Choice Hotels International | Histogen vs. Microsoft |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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