Correlation Between Microsoft and Perkins Small
Can any of the company-specific risk be diversified away by investing in both Microsoft and Perkins Small 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 Perkins Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Perkins Small Cap, you can compare the effects of market volatilities on Microsoft and Perkins Small 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 Perkins Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Perkins Small.
Diversification Opportunities for Microsoft and Perkins Small
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Perkins is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Perkins Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perkins Small Cap 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 Perkins Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perkins Small Cap has no effect on the direction of Microsoft i.e., Microsoft and Perkins Small go up and down completely randomly.
Pair Corralation between Microsoft and Perkins Small
Given the investment horizon of 90 days Microsoft is expected to generate 0.74 times more return on investment than Perkins Small. However, Microsoft is 1.34 times less risky than Perkins Small. It trades about 0.12 of its potential returns per unit of risk. Perkins Small Cap is currently generating about -0.2 per unit of risk. If you would invest 41,879 in Microsoft on October 26, 2024 and sell it today you would earn a total of 2,519 from holding Microsoft or generate 6.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Perkins Small Cap
Performance |
| Timeline |
| Microsoft |
| Perkins Small Cap |
Microsoft and Perkins Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Perkins Small
The main advantage of trading using opposite Microsoft and Perkins Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Perkins Small 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 Perkins Small will offset losses from the drop in Perkins Small's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. BLOCK INC | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| Perkins Small vs. Sterling Capital Short | Perkins Small vs. Federated Government Ultrashort | Perkins Small vs. Touchstone Ultra Short | Perkins Small vs. Siit Ultra Short |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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