Correlation Between Microsoft and Stone Ridge
Can any of the company-specific risk be diversified away by investing in both Microsoft and Stone Ridge 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 Stone Ridge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Stone Ridge 2060, you can compare the effects of market volatilities on Microsoft and Stone Ridge 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 Stone Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Stone Ridge.
Diversification Opportunities for Microsoft and Stone Ridge
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and Stone is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Stone Ridge 2060 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Ridge 2060 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 Stone Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Ridge 2060 has no effect on the direction of Microsoft i.e., Microsoft and Stone Ridge go up and down completely randomly.
Pair Corralation between Microsoft and Stone Ridge
Given the investment horizon of 90 days Microsoft is expected to under-perform the Stone Ridge. In addition to that, Microsoft is 2.22 times more volatile than Stone Ridge 2060. It trades about 0.0 of its total potential returns per unit of risk. Stone Ridge 2060 is currently generating about 0.03 per unit of volatility. If you would invest 1,753 in Stone Ridge 2060 on August 29, 2024 and sell it today you would earn a total of 9.00 from holding Stone Ridge 2060 or generate 0.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Stone Ridge 2060
Performance |
| Timeline |
| Microsoft |
| Stone Ridge 2060 |
Microsoft and Stone Ridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Stone Ridge
The main advantage of trading using opposite Microsoft and Stone Ridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Stone Ridge 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 Stone Ridge will offset losses from the drop in Stone Ridge's 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 Stocks Directory module to find actively traded stocks across global markets.
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