Correlation Between Microsoft and Kid ASA
Can any of the company-specific risk be diversified away by investing in both Microsoft and Kid ASA 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 Kid ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Kid ASA, you can compare the effects of market volatilities on Microsoft and Kid ASA 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 Kid ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Kid ASA.
Diversification Opportunities for Microsoft and Kid ASA
Modest diversification
The 3 months correlation between Microsoft and Kid is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Kid ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kid ASA 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 Kid ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kid ASA has no effect on the direction of Microsoft i.e., Microsoft and Kid ASA go up and down completely randomly.
Pair Corralation between Microsoft and Kid ASA
Given the investment horizon of 90 days Microsoft is expected to generate 0.42 times more return on investment than Kid ASA. However, Microsoft is 2.4 times less risky than Kid ASA. It trades about 0.19 of its potential returns per unit of risk. Kid ASA is currently generating about -0.23 per unit of risk. If you would invest 40,554 in Microsoft on September 1, 2024 and sell it today you would earn a total of 1,792 from holding Microsoft or generate 4.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Microsoft vs. Kid ASA
Performance |
| Timeline |
| Microsoft |
| Kid ASA |
Microsoft and Kid ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Kid ASA
The main advantage of trading using opposite Microsoft and Kid ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Kid ASA 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 Kid ASA will offset losses from the drop in Kid ASA's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Kid ASA vs. Europris ASA | Kid ASA vs. Selvaag Bolig ASA | Kid ASA vs. Storebrand ASA | Kid ASA vs. Kitron ASA |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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