Correlation Between Microsoft and Media Sentiment
Can any of the company-specific risk be diversified away by investing in both Microsoft and Media Sentiment 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 Media Sentiment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Media Sentiment, you can compare the effects of market volatilities on Microsoft and Media Sentiment 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 Media Sentiment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Media Sentiment.
Diversification Opportunities for Microsoft and Media Sentiment
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Media is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Media Sentiment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Media Sentiment 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 Media Sentiment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Media Sentiment has no effect on the direction of Microsoft i.e., Microsoft and Media Sentiment go up and down completely randomly.
Pair Corralation between Microsoft and Media Sentiment
Given the investment horizon of 90 days Microsoft is expected to generate 9.65 times less return on investment than Media Sentiment. But when comparing it to its historical volatility, Microsoft is 9.75 times less risky than Media Sentiment. It trades about 0.06 of its potential returns per unit of risk. Media Sentiment is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 6.50 in Media Sentiment on September 1, 2024 and sell it today you would earn a total of 3.00 from holding Media Sentiment or generate 46.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Microsoft vs. Media Sentiment
Performance |
| Timeline |
| Microsoft |
| Media Sentiment |
Microsoft and Media Sentiment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Media Sentiment
The main advantage of trading using opposite Microsoft and Media Sentiment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Media Sentiment 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 Media Sentiment will offset losses from the drop in Media Sentiment's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Media Sentiment vs. Global Develpmts | Media Sentiment vs. Il2m International Corp | Media Sentiment vs. Mediag3 | Media Sentiment vs. Mobile Lads Corp |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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