Correlation Between Microsoft and NIBE Industrier
Can any of the company-specific risk be diversified away by investing in both Microsoft and NIBE Industrier 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 NIBE Industrier into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and NIBE Industrier AB, you can compare the effects of market volatilities on Microsoft and NIBE Industrier 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 NIBE Industrier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and NIBE Industrier.
Diversification Opportunities for Microsoft and NIBE Industrier
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and NIBE is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and NIBE Industrier AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIBE Industrier AB 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 NIBE Industrier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIBE Industrier AB has no effect on the direction of Microsoft i.e., Microsoft and NIBE Industrier go up and down completely randomly.
Pair Corralation between Microsoft and NIBE Industrier
Given the investment horizon of 90 days Microsoft is expected to generate 0.69 times more return on investment than NIBE Industrier. However, Microsoft is 1.46 times less risky than NIBE Industrier. It trades about -0.04 of its potential returns per unit of risk. NIBE Industrier AB is currently generating about -0.21 per unit of risk. If you would invest 43,167 in Microsoft on August 31, 2024 and sell it today you would lose (868.00) from holding Microsoft or give up 2.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. NIBE Industrier AB
Performance |
| Timeline |
| Microsoft |
| NIBE Industrier AB |
Microsoft and NIBE Industrier Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and NIBE Industrier
The main advantage of trading using opposite Microsoft and NIBE Industrier positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, NIBE Industrier 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 NIBE Industrier will offset losses from the drop in NIBE Industrier's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| NIBE Industrier vs. Daikin Industries Ltd | NIBE Industrier vs. Trane Technologies plc | NIBE Industrier vs. AAON Inc | NIBE Industrier vs. Johnson Controls International |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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