Correlation Between Microsoft and Natures Sunshine
Can any of the company-specific risk be diversified away by investing in both Microsoft and Natures Sunshine 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 Natures Sunshine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Natures Sunshine Products, you can compare the effects of market volatilities on Microsoft and Natures Sunshine 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 Natures Sunshine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Natures Sunshine.
Diversification Opportunities for Microsoft and Natures Sunshine
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Natures is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Natures Sunshine Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natures Sunshine Products 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 Natures Sunshine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natures Sunshine Products has no effect on the direction of Microsoft i.e., Microsoft and Natures Sunshine go up and down completely randomly.
Pair Corralation between Microsoft and Natures Sunshine
Given the investment horizon of 90 days Microsoft is expected to under-perform the Natures Sunshine. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.65 times less risky than Natures Sunshine. The stock trades about -0.02 of its potential returns per unit of risk. The Natures Sunshine Products is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,362 in Natures Sunshine Products on August 31, 2024 and sell it today you would earn a total of 253.00 from holding Natures Sunshine Products or generate 18.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Natures Sunshine Products
Performance |
| Timeline |
| Microsoft |
| Natures Sunshine Products |
Microsoft and Natures Sunshine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Natures Sunshine
The main advantage of trading using opposite Microsoft and Natures Sunshine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Natures Sunshine 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 Natures Sunshine will offset losses from the drop in Natures Sunshine's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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