Correlation Between Microsoft and Kaya Holdings
Can any of the company-specific risk be diversified away by investing in both Microsoft and Kaya Holdings 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 Kaya Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Kaya Holdings, you can compare the effects of market volatilities on Microsoft and Kaya Holdings 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 Kaya Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Kaya Holdings.
Diversification Opportunities for Microsoft and Kaya Holdings
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Kaya is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Kaya Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaya Holdings 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 Kaya Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaya Holdings has no effect on the direction of Microsoft i.e., Microsoft and Kaya Holdings go up and down completely randomly.
Pair Corralation between Microsoft and Kaya Holdings
Given the investment horizon of 90 days Microsoft is expected to generate 3.29 times less return on investment than Kaya Holdings. But when comparing it to its historical volatility, Microsoft is 7.06 times less risky than Kaya Holdings. It trades about 0.08 of its potential returns per unit of risk. Kaya Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 6.42 in Kaya Holdings on September 2, 2024 and sell it today you would lose (2.62) from holding Kaya Holdings or give up 40.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Kaya Holdings
Performance |
| Timeline |
| Microsoft |
| Kaya Holdings |
Microsoft and Kaya Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Kaya Holdings
The main advantage of trading using opposite Microsoft and Kaya Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Kaya Holdings 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 Kaya Holdings will offset losses from the drop in Kaya Holdings' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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