Correlation Between Microsoft and Hexcel
Can any of the company-specific risk be diversified away by investing in both Microsoft and Hexcel 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 Hexcel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Hexcel, you can compare the effects of market volatilities on Microsoft and Hexcel 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 Hexcel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Hexcel.
Diversification Opportunities for Microsoft and Hexcel
Very weak diversification
The 3 months correlation between Microsoft and Hexcel is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Hexcel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hexcel 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 Hexcel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hexcel has no effect on the direction of Microsoft i.e., Microsoft and Hexcel go up and down completely randomly.
Pair Corralation between Microsoft and Hexcel
Given the investment horizon of 90 days Microsoft is expected to under-perform the Hexcel. In addition to that, Microsoft is 1.18 times more volatile than Hexcel. It trades about -0.03 of its total potential returns per unit of risk. Hexcel is currently generating about 0.15 per unit of volatility. If you would invest 6,270 in Hexcel on November 1, 2024 and sell it today you would earn a total of 331.50 from holding Hexcel or generate 5.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Hexcel
Performance |
| Timeline |
| Microsoft |
| Hexcel |
Microsoft and Hexcel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Hexcel
The main advantage of trading using opposite Microsoft and Hexcel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Hexcel 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 Hexcel will offset losses from the drop in Hexcel's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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