Correlation Between Microsoft and Nano One
Can any of the company-specific risk be diversified away by investing in both Microsoft and Nano One 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 One into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Nano One Materials, you can compare the effects of market volatilities on Microsoft and Nano One 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 One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Nano One.
Diversification Opportunities for Microsoft and Nano One
Good diversification
The 3 months correlation between Microsoft and Nano is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Nano One Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nano One Materials 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 One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nano One Materials has no effect on the direction of Microsoft i.e., Microsoft and Nano One go up and down completely randomly.
Pair Corralation between Microsoft and Nano One
Given the investment horizon of 90 days Microsoft is expected to under-perform the Nano One. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 4.22 times less risky than Nano One. The stock trades about -0.07 of its potential returns per unit of risk. The Nano One Materials is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 91.00 in Nano One Materials on October 24, 2024 and sell it today you would lose (1.00) from holding Nano One Materials or give up 1.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Microsoft vs. Nano One Materials
Performance |
| Timeline |
| Microsoft |
| Nano One Materials |
Microsoft and Nano One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Nano One
The main advantage of trading using opposite Microsoft and Nano One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Nano One 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 One will offset losses from the drop in Nano One's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. BLOCK INC | Microsoft vs. Adobe Systems Incorporated |
| Nano One vs. Rocky Mountain Liquor | Nano One vs. North American Construction | Nano One vs. Renoworks Software | Nano One vs. DRI Healthcare Trust |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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