Correlation Between Microsoft and Neonode
Can any of the company-specific risk be diversified away by investing in both Microsoft and Neonode 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 Neonode into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Neonode, you can compare the effects of market volatilities on Microsoft and Neonode 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 Neonode. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Neonode.
Diversification Opportunities for Microsoft and Neonode
Poor diversification
The 3 months correlation between Microsoft and Neonode is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Neonode in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neonode 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 Neonode. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neonode has no effect on the direction of Microsoft i.e., Microsoft and Neonode go up and down completely randomly.
Pair Corralation between Microsoft and Neonode
Given the investment horizon of 90 days Microsoft is expected to generate 4.11 times less return on investment than Neonode. But when comparing it to its historical volatility, Microsoft is 5.96 times less risky than Neonode. It trades about 0.05 of its potential returns per unit of risk. Neonode is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 828.00 in Neonode on August 27, 2024 and sell it today you would lose (12.00) from holding Neonode or give up 1.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Neonode
Performance |
| Timeline |
| Microsoft |
| Neonode |
Microsoft and Neonode Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Neonode
The main advantage of trading using opposite Microsoft and Neonode positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Neonode 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 Neonode will offset losses from the drop in Neonode's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| Neonode vs. LightPath Technologies | Neonode vs. Methode Electronics | Neonode vs. OSI Systems | Neonode vs. Plexus Corp |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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