Correlation Between Microsoft and Novotek AB
Can any of the company-specific risk be diversified away by investing in both Microsoft and Novotek 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 Novotek AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Novotek AB, you can compare the effects of market volatilities on Microsoft and Novotek 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 Novotek AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Novotek AB.
Diversification Opportunities for Microsoft and Novotek AB
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Novotek is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Novotek AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novotek AB 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 Novotek AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novotek AB has no effect on the direction of Microsoft i.e., Microsoft and Novotek AB go up and down completely randomly.
Pair Corralation between Microsoft and Novotek AB
Given the investment horizon of 90 days Microsoft is expected to generate 0.56 times more return on investment than Novotek AB. However, Microsoft is 1.79 times less risky than Novotek AB. It trades about 0.1 of its potential returns per unit of risk. Novotek AB is currently generating about 0.05 per unit of risk. If you would invest 22,130 in Microsoft on August 28, 2024 and sell it today you would earn a total of 19,749 from holding Microsoft or generate 89.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Novotek AB
Performance |
| Timeline |
| Microsoft |
| Novotek AB |
Microsoft and Novotek AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Novotek AB
The main advantage of trading using opposite Microsoft and Novotek AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Novotek 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 Novotek AB will offset losses from the drop in Novotek AB's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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