Correlation Between Microsoft and Manila Electric
Can any of the company-specific risk be diversified away by investing in both Microsoft and Manila Electric 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 Manila Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Manila Electric Co, you can compare the effects of market volatilities on Microsoft and Manila Electric 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 Manila Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Manila Electric.
Diversification Opportunities for Microsoft and Manila Electric
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Manila is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Manila Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manila Electric 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 Manila Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manila Electric has no effect on the direction of Microsoft i.e., Microsoft and Manila Electric go up and down completely randomly.
Pair Corralation between Microsoft and Manila Electric
Given the investment horizon of 90 days Microsoft is expected to generate 1.7 times less return on investment than Manila Electric. But when comparing it to its historical volatility, Microsoft is 1.34 times less risky than Manila Electric. It trades about 0.06 of its potential returns per unit of risk. Manila Electric Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 30,476 in Manila Electric Co on August 31, 2024 and sell it today you would earn a total of 17,424 from holding Manila Electric Co or generate 57.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.06% |
| Values | Daily Returns |
Microsoft vs. Manila Electric Co
Performance |
| Timeline |
| Microsoft |
| Manila Electric |
Microsoft and Manila Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Manila Electric
The main advantage of trading using opposite Microsoft and Manila Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Manila Electric 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 Manila Electric will offset losses from the drop in Manila Electric's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Manila Electric vs. Semirara Mining Corp | Manila Electric vs. Philex Mining Corp | Manila Electric vs. Metropolitan Bank Trust | Manila Electric vs. Lepanto Consolidated Mining |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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