Correlation Between Microsoft and NIPPON STEEL
Can any of the company-specific risk be diversified away by investing in both Microsoft and NIPPON STEEL 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 NIPPON STEEL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and NIPPON STEEL SPADR, you can compare the effects of market volatilities on Microsoft and NIPPON STEEL 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 NIPPON STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and NIPPON STEEL.
Diversification Opportunities for Microsoft and NIPPON STEEL
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and NIPPON is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and NIPPON STEEL SPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIPPON STEEL SPADR 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 NIPPON STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIPPON STEEL SPADR has no effect on the direction of Microsoft i.e., Microsoft and NIPPON STEEL go up and down completely randomly.
Pair Corralation between Microsoft and NIPPON STEEL
Given the investment horizon of 90 days Microsoft is expected to generate 0.4 times more return on investment than NIPPON STEEL. However, Microsoft is 2.47 times less risky than NIPPON STEEL. It trades about 0.03 of its potential returns per unit of risk. NIPPON STEEL SPADR is currently generating about 0.0 per unit of risk. If you would invest 39,463 in Microsoft on August 28, 2024 and sell it today you would earn a total of 2,416 from holding Microsoft or generate 6.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.05% |
| Values | Daily Returns |
Microsoft vs. NIPPON STEEL SPADR
Performance |
| Timeline |
| Microsoft |
| NIPPON STEEL SPADR |
Microsoft and NIPPON STEEL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and NIPPON STEEL
The main advantage of trading using opposite Microsoft and NIPPON STEEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, NIPPON STEEL 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 NIPPON STEEL will offset losses from the drop in NIPPON STEEL's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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