Correlation Between Microsoft and IDEX
Can any of the company-specific risk be diversified away by investing in both Microsoft and IDEX 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 IDEX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and IDEX Corporation, you can compare the effects of market volatilities on Microsoft and IDEX 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 IDEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and IDEX.
Diversification Opportunities for Microsoft and IDEX
Significant diversification
The 3 months correlation between Microsoft and IDEX is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and IDEX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDEX 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 IDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDEX has no effect on the direction of Microsoft i.e., Microsoft and IDEX go up and down completely randomly.
Pair Corralation between Microsoft and IDEX
Given the investment horizon of 90 days Microsoft is expected to under-perform the IDEX. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.29 times less risky than IDEX. The stock trades about -0.05 of its potential returns per unit of risk. The IDEX Corporation is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 20,484 in IDEX Corporation on August 27, 2024 and sell it today you would earn a total of 2,766 from holding IDEX Corporation or generate 13.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. IDEX Corp.
Performance |
| Timeline |
| Microsoft |
| IDEX |
Microsoft and IDEX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and IDEX
The main advantage of trading using opposite Microsoft and IDEX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, IDEX 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 IDEX will offset losses from the drop in IDEX's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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