Correlation Between Microsoft and POWER METALS
Can any of the company-specific risk be diversified away by investing in both Microsoft and POWER METALS 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 POWER METALS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and POWER METALS, you can compare the effects of market volatilities on Microsoft and POWER METALS 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 POWER METALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and POWER METALS.
Diversification Opportunities for Microsoft and POWER METALS
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and POWER is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and POWER METALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POWER METALS 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 POWER METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POWER METALS has no effect on the direction of Microsoft i.e., Microsoft and POWER METALS go up and down completely randomly.
Pair Corralation between Microsoft and POWER METALS
Given the investment horizon of 90 days Microsoft is expected to generate 3.44 times less return on investment than POWER METALS. But when comparing it to its historical volatility, Microsoft is 4.06 times less risky than POWER METALS. It trades about 0.05 of its potential returns per unit of risk. POWER METALS is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 19.00 in POWER METALS on September 3, 2024 and sell it today you would earn a total of 6.00 from holding POWER METALS or generate 31.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.41% |
| Values | Daily Returns |
Microsoft vs. POWER METALS
Performance |
| Timeline |
| Microsoft |
| POWER METALS |
Microsoft and POWER METALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and POWER METALS
The main advantage of trading using opposite Microsoft and POWER METALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, POWER METALS 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 POWER METALS will offset losses from the drop in POWER METALS's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| POWER METALS vs. HANOVER INSURANCE | POWER METALS vs. Ping An Insurance | POWER METALS vs. REVO INSURANCE SPA | POWER METALS vs. RETAIL FOOD GROUP |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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