Correlation Between Microsoft and 1CM
Can any of the company-specific risk be diversified away by investing in both Microsoft and 1CM 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 1CM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and 1CM Inc, you can compare the effects of market volatilities on Microsoft and 1CM 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 1CM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and 1CM.
Diversification Opportunities for Microsoft and 1CM
Good diversification
The 3 months correlation between Microsoft and 1CM is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and 1CM Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1CM Inc 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 1CM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1CM Inc has no effect on the direction of Microsoft i.e., Microsoft and 1CM go up and down completely randomly.
Pair Corralation between Microsoft and 1CM
Given the investment horizon of 90 days Microsoft is expected to generate 0.46 times more return on investment than 1CM. However, Microsoft is 2.19 times less risky than 1CM. It trades about -0.04 of its potential returns per unit of risk. 1CM Inc is currently generating about -0.22 per unit of risk. If you would invest 42,388 in Microsoft on August 25, 2024 and sell it today you would lose (688.00) from holding Microsoft or give up 1.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. 1CM Inc
Performance |
| Timeline |
| Microsoft |
| 1CM Inc |
Microsoft and 1CM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and 1CM
The main advantage of trading using opposite Microsoft and 1CM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, 1CM 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 1CM will offset losses from the drop in 1CM's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| 1CM vs. Green Cures Botanical | 1CM vs. Galexxy Holdings | 1CM vs. Indoor Harvest Corp | 1CM vs. Speakeasy Cannabis Club |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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