Correlation Between Microsoft and New York
Can any of the company-specific risk be diversified away by investing in both Microsoft and New York 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 New York into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and New York Mortgage, you can compare the effects of market volatilities on Microsoft and New York 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 New York. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and New York.
Diversification Opportunities for Microsoft and New York
Modest diversification
The 3 months correlation between Microsoft and New is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and New York Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New York Mortgage 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 New York. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New York Mortgage has no effect on the direction of Microsoft i.e., Microsoft and New York go up and down completely randomly.
Pair Corralation between Microsoft and New York
Given the investment horizon of 90 days Microsoft is expected to under-perform the New York. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.04 times less risky than New York. The stock trades about -0.04 of its potential returns per unit of risk. The New York Mortgage is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 560.00 in New York Mortgage on August 31, 2024 and sell it today you would earn a total of 62.00 from holding New York Mortgage or generate 11.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. New York Mortgage
Performance |
| Timeline |
| Microsoft |
| New York Mortgage |
Microsoft and New York Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and New York
The main advantage of trading using opposite Microsoft and New York positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, New York 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 New York will offset losses from the drop in New York's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| New York vs. Two Harbors Investments | New York vs. ARMOUR Residential REIT | New York vs. Annaly Capital Management | New York vs. AGNC Investment Corp |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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