Correlation Between Microsoft and NSTAR Electric
Can any of the company-specific risk be diversified away by investing in both Microsoft and NSTAR Electric 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 NSTAR Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and NSTAR Electric, you can compare the effects of market volatilities on Microsoft and NSTAR Electric 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 NSTAR Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and NSTAR Electric.
Diversification Opportunities for Microsoft and NSTAR Electric
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and NSTAR is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and NSTAR Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NSTAR Electric 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 NSTAR Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NSTAR Electric has no effect on the direction of Microsoft i.e., Microsoft and NSTAR Electric go up and down completely randomly.
Pair Corralation between Microsoft and NSTAR Electric
Given the investment horizon of 90 days Microsoft is expected to generate 1.76 times more return on investment than NSTAR Electric. However, Microsoft is 1.76 times more volatile than NSTAR Electric. It trades about -0.04 of its potential returns per unit of risk. NSTAR Electric is currently generating about -0.08 per unit of risk. If you would invest 42,335 in Microsoft on November 4, 2024 and sell it today you would lose (829.00) from holding Microsoft or give up 1.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. NSTAR Electric
Performance |
| Timeline |
| Microsoft |
| NSTAR Electric |
Microsoft and NSTAR Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and NSTAR Electric
The main advantage of trading using opposite Microsoft and NSTAR Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, NSTAR Electric 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 NSTAR Electric will offset losses from the drop in NSTAR Electric's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| NSTAR Electric vs. Norfolk Southern | NSTAR Electric vs. CleanGo Innovations | NSTAR Electric vs. RBC Bearings Incorporated | NSTAR Electric vs. Delek Logistics Partners |
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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