Correlation Between Microsoft and Neoen SA
Can any of the company-specific risk be diversified away by investing in both Microsoft and Neoen SA 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 Neoen SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Neoen SA, you can compare the effects of market volatilities on Microsoft and Neoen SA 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 Neoen SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Neoen SA.
Diversification Opportunities for Microsoft and Neoen SA
Very good diversification
The 3 months correlation between Microsoft and Neoen is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Neoen SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neoen SA 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 Neoen SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neoen SA has no effect on the direction of Microsoft i.e., Microsoft and Neoen SA go up and down completely randomly.
Pair Corralation between Microsoft and Neoen SA
Given the investment horizon of 90 days Microsoft is expected to generate 2.07 times more return on investment than Neoen SA. However, Microsoft is 2.07 times more volatile than Neoen SA. It trades about 0.28 of its potential returns per unit of risk. Neoen SA is currently generating about 0.06 per unit of risk. If you would invest 42,218 in Microsoft on September 13, 2024 and sell it today you would earn a total of 2,738 from holding Microsoft or generate 6.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Microsoft vs. Neoen SA
Performance |
| Timeline |
| Microsoft |
| Neoen SA |
Microsoft and Neoen SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Neoen SA
The main advantage of trading using opposite Microsoft and Neoen SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Neoen SA 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 Neoen SA will offset losses from the drop in Neoen SA's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Neoen SA vs. VERBUND AG ADR | Neoen SA vs. TOHOKU EL PWR | Neoen SA vs. BEIJJINGNENG CLERGHYC1 | Neoen SA vs. EnviTec Biogas AG |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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