Correlation Between Microsoft and NEO PERFORMMAT
Can any of the company-specific risk be diversified away by investing in both Microsoft and NEO PERFORMMAT 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 NEO PERFORMMAT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and NEO PERFORMMAT, you can compare the effects of market volatilities on Microsoft and NEO PERFORMMAT 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 NEO PERFORMMAT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and NEO PERFORMMAT.
Diversification Opportunities for Microsoft and NEO PERFORMMAT
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and NEO is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and NEO PERFORMMAT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEO PERFORMMAT 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 NEO PERFORMMAT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEO PERFORMMAT has no effect on the direction of Microsoft i.e., Microsoft and NEO PERFORMMAT go up and down completely randomly.
Pair Corralation between Microsoft and NEO PERFORMMAT
Given the investment horizon of 90 days Microsoft is expected to generate 0.4 times more return on investment than NEO PERFORMMAT. However, Microsoft is 2.53 times less risky than NEO PERFORMMAT. It trades about -0.19 of its potential returns per unit of risk. NEO PERFORMMAT is currently generating about -0.21 per unit of risk. If you would invest 41,499 in Microsoft on December 8, 2024 and sell it today you would lose (2,168) from holding Microsoft or give up 5.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. NEO PERFORMMAT
Performance |
| Timeline |
| Microsoft |
| NEO PERFORMMAT |
Microsoft and NEO PERFORMMAT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and NEO PERFORMMAT
The main advantage of trading using opposite Microsoft and NEO PERFORMMAT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, NEO PERFORMMAT 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 NEO PERFORMMAT will offset losses from the drop in NEO PERFORMMAT's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| NEO PERFORMMAT vs. Schweizer Electronic AG | NEO PERFORMMAT vs. Hellenic Telecommunications Organization | NEO PERFORMMAT vs. KIMBALL ELECTRONICS | NEO PERFORMMAT vs. LPKF Laser Electronics |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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