Correlation Between Microsoft and Kingspan Group
Can any of the company-specific risk be diversified away by investing in both Microsoft and Kingspan Group 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 Kingspan Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Kingspan Group plc, you can compare the effects of market volatilities on Microsoft and Kingspan Group 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 Kingspan Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Kingspan Group.
Diversification Opportunities for Microsoft and Kingspan Group
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Microsoft and Kingspan is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Kingspan Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingspan Group plc 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 Kingspan Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingspan Group plc has no effect on the direction of Microsoft i.e., Microsoft and Kingspan Group go up and down completely randomly.
Pair Corralation between Microsoft and Kingspan Group
Given the investment horizon of 90 days Microsoft is expected to generate 0.75 times more return on investment than Kingspan Group. However, Microsoft is 1.34 times less risky than Kingspan Group. It trades about 0.02 of its potential returns per unit of risk. Kingspan Group plc is currently generating about -0.09 per unit of risk. If you would invest 41,195 in Microsoft on August 31, 2024 and sell it today you would earn a total of 1,151 from holding Microsoft or generate 2.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.69% |
| Values | Daily Returns |
Microsoft vs. Kingspan Group plc
Performance |
| Timeline |
| Microsoft |
| Kingspan Group plc |
Microsoft and Kingspan Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Kingspan Group
The main advantage of trading using opposite Microsoft and Kingspan Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Kingspan Group 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 Kingspan Group will offset losses from the drop in Kingspan Group's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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 Stocks Directory module to find actively traded stocks across global markets.
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