Correlation Between Microsoft and Mainstreet Bank
Can any of the company-specific risk be diversified away by investing in both Microsoft and Mainstreet Bank 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 Mainstreet Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Mainstreet Bank, you can compare the effects of market volatilities on Microsoft and Mainstreet Bank 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 Mainstreet Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Mainstreet Bank.
Diversification Opportunities for Microsoft and Mainstreet Bank
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Microsoft and Mainstreet is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Mainstreet Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstreet Bank 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 Mainstreet Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstreet Bank has no effect on the direction of Microsoft i.e., Microsoft and Mainstreet Bank go up and down completely randomly.
Pair Corralation between Microsoft and Mainstreet Bank
Given the investment horizon of 90 days Microsoft is expected to generate 4.59 times less return on investment than Mainstreet Bank. But when comparing it to its historical volatility, Microsoft is 1.99 times less risky than Mainstreet Bank. It trades about 0.02 of its potential returns per unit of risk. Mainstreet Bank is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,626 in Mainstreet Bank on August 31, 2024 and sell it today you would earn a total of 233.00 from holding Mainstreet Bank or generate 14.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Mainstreet Bank
Performance |
| Timeline |
| Microsoft |
| Mainstreet Bank |
Microsoft and Mainstreet Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Mainstreet Bank
The main advantage of trading using opposite Microsoft and Mainstreet Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Mainstreet Bank 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 Mainstreet Bank will offset losses from the drop in Mainstreet Bank's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Mainstreet Bank vs. Oak Valley Bancorp | Mainstreet Bank vs. Home Federal Bancorp | Mainstreet Bank vs. LINKBANCORP | Mainstreet Bank vs. First Northwest Bancorp |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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