Correlation Between Microsoft and Ceconomy
Can any of the company-specific risk be diversified away by investing in both Microsoft and Ceconomy 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 Ceconomy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Ceconomy AG ADR, you can compare the effects of market volatilities on Microsoft and Ceconomy 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 Ceconomy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Ceconomy.
Diversification Opportunities for Microsoft and Ceconomy
Average diversification
The 3 months correlation between Microsoft and Ceconomy is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Ceconomy AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ceconomy AG ADR 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 Ceconomy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ceconomy AG ADR has no effect on the direction of Microsoft i.e., Microsoft and Ceconomy go up and down completely randomly.
Pair Corralation between Microsoft and Ceconomy
Given the investment horizon of 90 days Microsoft is expected to under-perform the Ceconomy. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 4.45 times less risky than Ceconomy. The stock trades about -0.02 of its potential returns per unit of risk. The Ceconomy AG ADR is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 62.00 in Ceconomy AG ADR on August 24, 2024 and sell it today you would lose (3.00) from holding Ceconomy AG ADR or give up 4.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Ceconomy AG ADR
Performance |
| Timeline |
| Microsoft |
| Ceconomy AG ADR |
Microsoft and Ceconomy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Ceconomy
The main advantage of trading using opposite Microsoft and Ceconomy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Ceconomy 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 Ceconomy will offset losses from the drop in Ceconomy's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Ceconomy vs. Green River Gold | Ceconomy vs. Dixons Carphone plc | Ceconomy vs. Tandy Leather Factory | Ceconomy vs. Card Factory plc |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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