Correlation Between Microsoft and MCF Energy
Can any of the company-specific risk be diversified away by investing in both Microsoft and MCF Energy 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 MCF Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and MCF Energy, you can compare the effects of market volatilities on Microsoft and MCF Energy 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 MCF Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and MCF Energy.
Diversification Opportunities for Microsoft and MCF Energy
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Microsoft and MCF is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and MCF Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCF Energy 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 MCF Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCF Energy has no effect on the direction of Microsoft i.e., Microsoft and MCF Energy go up and down completely randomly.
Pair Corralation between Microsoft and MCF Energy
Given the investment horizon of 90 days Microsoft is expected to under-perform the MCF Energy. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 8.49 times less risky than MCF Energy. The stock trades about -0.21 of its potential returns per unit of risk. The MCF Energy is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 3.90 in MCF Energy on December 1, 2024 and sell it today you would earn a total of 1.33 from holding MCF Energy or generate 34.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. MCF Energy
Performance |
| Timeline |
| Microsoft |
| MCF Energy |
Microsoft and MCF Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and MCF Energy
The main advantage of trading using opposite Microsoft and MCF Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, MCF Energy 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 MCF Energy will offset losses from the drop in MCF Energy's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| MCF Energy vs. Anheuser Busch Inbev | MCF Energy vs. ScanSource | MCF Energy vs. BK Technologies | MCF Energy vs. Digi International |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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