Correlation Between Microsoft and Eyecity
Can any of the company-specific risk be diversified away by investing in both Microsoft and Eyecity 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 Eyecity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and EyecityCom, you can compare the effects of market volatilities on Microsoft and Eyecity 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 Eyecity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Eyecity.
Diversification Opportunities for Microsoft and Eyecity
Modest diversification
The 3 months correlation between Microsoft and Eyecity is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and EyecityCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EyecityCom 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 Eyecity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EyecityCom has no effect on the direction of Microsoft i.e., Microsoft and Eyecity go up and down completely randomly.
Pair Corralation between Microsoft and Eyecity
Given the investment horizon of 90 days Microsoft is expected to generate 40.34 times less return on investment than Eyecity. But when comparing it to its historical volatility, Microsoft is 23.71 times less risky than Eyecity. It trades about 0.09 of its potential returns per unit of risk. EyecityCom is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 0.03 in EyecityCom on August 30, 2024 and sell it today you would earn a total of 0.01 from holding EyecityCom or generate 33.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. EyecityCom
Performance |
| Timeline |
| Microsoft |
| EyecityCom |
Microsoft and Eyecity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Eyecity
The main advantage of trading using opposite Microsoft and Eyecity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Eyecity 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 Eyecity will offset losses from the drop in Eyecity's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Eyecity vs. PayPal Holdings | Eyecity vs. Nasdaq Inc | Eyecity vs. Choice Hotels International | Eyecity 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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