Correlation Between Microsoft and Nano Labs
Can any of the company-specific risk be diversified away by investing in both Microsoft and Nano Labs 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 Nano Labs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Nano Labs, you can compare the effects of market volatilities on Microsoft and Nano Labs 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 Nano Labs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Nano Labs.
Diversification Opportunities for Microsoft and Nano Labs
Good diversification
The 3 months correlation between Microsoft and Nano is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Nano Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nano Labs 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 Nano Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nano Labs has no effect on the direction of Microsoft i.e., Microsoft and Nano Labs go up and down completely randomly.
Pair Corralation between Microsoft and Nano Labs
Given the investment horizon of 90 days Microsoft is expected to under-perform the Nano Labs. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 21.78 times less risky than Nano Labs. The stock trades about -0.06 of its potential returns per unit of risk. The Nano Labs is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 610.00 in Nano Labs on August 26, 2024 and sell it today you would earn a total of 216.00 from holding Nano Labs or generate 35.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Nano Labs
Performance |
| Timeline |
| Microsoft |
| Nano Labs |
Microsoft and Nano Labs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Nano Labs
The main advantage of trading using opposite Microsoft and Nano Labs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Nano Labs 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 Nano Labs will offset losses from the drop in Nano Labs' long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Rapid7 Inc |
| Nano Labs vs. SEALSQ Corp | Nano Labs vs. GSI Technology | Nano Labs vs. SemiLEDS | Nano Labs vs. ChipMOS Technologies |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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