Correlation Between Microsoft and STRAX AB
Can any of the company-specific risk be diversified away by investing in both Microsoft and STRAX AB 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 STRAX AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and STRAX AB SK, you can compare the effects of market volatilities on Microsoft and STRAX AB 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 STRAX AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and STRAX AB.
Diversification Opportunities for Microsoft and STRAX AB
Excellent diversification
The 3 months correlation between Microsoft and STRAX is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and STRAX AB SK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRAX AB SK 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 STRAX AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRAX AB SK has no effect on the direction of Microsoft i.e., Microsoft and STRAX AB go up and down completely randomly.
Pair Corralation between Microsoft and STRAX AB
Given the investment horizon of 90 days Microsoft is expected to generate 26.55 times less return on investment than STRAX AB. But when comparing it to its historical volatility, Microsoft is 41.45 times less risky than STRAX AB. It trades about 0.09 of its potential returns per unit of risk. STRAX AB SK is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 10.00 in STRAX AB SK on October 7, 2024 and sell it today you would lose (9.16) from holding STRAX AB SK or give up 91.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.8% |
| Values | Daily Returns |
Microsoft vs. STRAX AB SK
Performance |
| Timeline |
| Microsoft |
| STRAX AB SK |
Microsoft and STRAX AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and STRAX AB
The main advantage of trading using opposite Microsoft and STRAX AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, STRAX AB 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 STRAX AB will offset losses from the drop in STRAX AB's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| STRAX AB vs. PREMIER FOODS | STRAX AB vs. Astral Foods Limited | STRAX AB vs. Jacquet Metal Service | STRAX AB vs. UNITED RENTALS |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
Other Complementary Tools
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
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| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios |