Correlation Between Microsoft and Cambria Micro
Can any of the company-specific risk be diversified away by investing in both Microsoft and Cambria Micro 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 Cambria Micro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Cambria Micro And, you can compare the effects of market volatilities on Microsoft and Cambria Micro 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 Cambria Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Cambria Micro.
Diversification Opportunities for Microsoft and Cambria Micro
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Cambria is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Cambria Micro And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambria Micro And 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 Cambria Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambria Micro And has no effect on the direction of Microsoft i.e., Microsoft and Cambria Micro go up and down completely randomly.
Pair Corralation between Microsoft and Cambria Micro
Given the investment horizon of 90 days Microsoft is expected to generate 1.54 times more return on investment than Cambria Micro. However, Microsoft is 1.54 times more volatile than Cambria Micro And. It trades about 0.06 of its potential returns per unit of risk. Cambria Micro And is currently generating about 0.05 per unit of risk. If you would invest 43,811 in Microsoft on October 26, 2024 and sell it today you would earn a total of 595.00 from holding Microsoft or generate 1.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Cambria Micro And
Performance |
| Timeline |
| Microsoft |
| Cambria Micro And |
Microsoft and Cambria Micro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Cambria Micro
The main advantage of trading using opposite Microsoft and Cambria Micro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Cambria Micro 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 Cambria Micro will offset losses from the drop in Cambria Micro's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. BLOCK INC | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| Cambria Micro vs. Research Affiliates Deletions | Cambria Micro vs. First Trust Dow | Cambria Micro vs. iShares Micro Cap ETF | Cambria Micro vs. Vanguard Mega Cap |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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