Correlation Between Microsoft and Nomura Holdings
Can any of the company-specific risk be diversified away by investing in both Microsoft and Nomura Holdings 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 Nomura Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Nomura Holdings, you can compare the effects of market volatilities on Microsoft and Nomura Holdings 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 Nomura Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Nomura Holdings.
Diversification Opportunities for Microsoft and Nomura Holdings
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Nomura is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Nomura Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomura Holdings 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 Nomura Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nomura Holdings has no effect on the direction of Microsoft i.e., Microsoft and Nomura Holdings go up and down completely randomly.
Pair Corralation between Microsoft and Nomura Holdings
Given the investment horizon of 90 days Microsoft is expected to generate 7.4 times less return on investment than Nomura Holdings. But when comparing it to its historical volatility, Microsoft is 1.38 times less risky than Nomura Holdings. It trades about 0.02 of its potential returns per unit of risk. Nomura Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 507.00 in Nomura Holdings on August 25, 2024 and sell it today you would earn a total of 58.00 from holding Nomura Holdings or generate 11.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.46% |
| Values | Daily Returns |
Microsoft vs. Nomura Holdings
Performance |
| Timeline |
| Microsoft |
| Nomura Holdings |
Microsoft and Nomura Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Nomura Holdings
The main advantage of trading using opposite Microsoft and Nomura Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Nomura Holdings 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 Nomura Holdings will offset losses from the drop in Nomura Holdings' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Nomura Holdings vs. Constellation Software | Nomura Holdings vs. UNIVMUSIC GRPADR050 | Nomura Holdings vs. BE Semiconductor Industries | Nomura Holdings vs. NXP Semiconductors NV |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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