Correlation Between Microsoft and Humatech
Can any of the company-specific risk be diversified away by investing in both Microsoft and Humatech 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 Humatech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Humatech, you can compare the effects of market volatilities on Microsoft and Humatech 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 Humatech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Humatech.
Diversification Opportunities for Microsoft and Humatech
Significant diversification
The 3 months correlation between Microsoft and Humatech is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Humatech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humatech 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 Humatech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Humatech has no effect on the direction of Microsoft i.e., Microsoft and Humatech go up and down completely randomly.
Pair Corralation between Microsoft and Humatech
Given the investment horizon of 90 days Microsoft is expected to generate 240.38 times less return on investment than Humatech. But when comparing it to its historical volatility, Microsoft is 96.23 times less risky than Humatech. It trades about 0.05 of its potential returns per unit of risk. Humatech is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 0.01 in Humatech on September 2, 2024 and sell it today you would earn a total of 0.17 from holding Humatech or generate 1700.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.46% |
| Values | Daily Returns |
Microsoft vs. Humatech
Performance |
| Timeline |
| Microsoft |
| Humatech |
Microsoft and Humatech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Humatech
The main advantage of trading using opposite Microsoft and Humatech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Humatech 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 Humatech will offset losses from the drop in Humatech's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Humatech vs. Valneva SE ADR | Humatech vs. WEC Energy Group | Humatech vs. Transportadora de Gas | Humatech vs. Suburban Propane Partners |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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