Correlation Between Microsoft and Eversource Energy
Can any of the company-specific risk be diversified away by investing in both Microsoft and Eversource Energy 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 Eversource Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Eversource Energy, you can compare the effects of market volatilities on Microsoft and Eversource Energy 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 Eversource Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Eversource Energy.
Diversification Opportunities for Microsoft and Eversource Energy
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Eversource is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Eversource Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eversource Energy 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 Eversource Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eversource Energy has no effect on the direction of Microsoft i.e., Microsoft and Eversource Energy go up and down completely randomly.
Pair Corralation between Microsoft and Eversource Energy
Given the investment horizon of 90 days Microsoft is expected to generate 0.79 times more return on investment than Eversource Energy. However, Microsoft is 1.27 times less risky than Eversource Energy. It trades about 0.07 of its potential returns per unit of risk. Eversource Energy is currently generating about 0.0 per unit of risk. If you would invest 30,280 in Microsoft on August 31, 2024 and sell it today you would earn a total of 12,019 from holding Microsoft or generate 39.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.01% |
| Values | Daily Returns |
Microsoft vs. Eversource Energy
Performance |
| Timeline |
| Microsoft |
| Eversource Energy |
Microsoft and Eversource Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Eversource Energy
The main advantage of trading using opposite Microsoft and Eversource Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Eversource Energy 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 Eversource Energy will offset losses from the drop in Eversource Energy's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Eversource Energy vs. National Beverage Corp | Eversource Energy vs. Kaiser Aluminum | Eversource Energy vs. AUSNUTRIA DAIRY | Eversource Energy vs. PREMIER FOODS |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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