Correlation Between Microsoft and Predictive Discovery
Can any of the company-specific risk be diversified away by investing in both Microsoft and Predictive Discovery 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 Predictive Discovery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Predictive Discovery, you can compare the effects of market volatilities on Microsoft and Predictive Discovery 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 Predictive Discovery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Predictive Discovery.
Diversification Opportunities for Microsoft and Predictive Discovery
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and Predictive is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Predictive Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Predictive Discovery 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 Predictive Discovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Predictive Discovery has no effect on the direction of Microsoft i.e., Microsoft and Predictive Discovery go up and down completely randomly.
Pair Corralation between Microsoft and Predictive Discovery
Given the investment horizon of 90 days Microsoft is expected to generate 0.42 times more return on investment than Predictive Discovery. However, Microsoft is 2.36 times less risky than Predictive Discovery. It trades about -0.06 of its potential returns per unit of risk. Predictive Discovery is currently generating about -0.11 per unit of risk. If you would invest 42,729 in Microsoft on August 26, 2024 and sell it today you would lose (1,029) from holding Microsoft or give up 2.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Predictive Discovery
Performance |
| Timeline |
| Microsoft |
| Predictive Discovery |
Microsoft and Predictive Discovery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Predictive Discovery
The main advantage of trading using opposite Microsoft and Predictive Discovery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Predictive Discovery 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 Predictive Discovery will offset losses from the drop in Predictive Discovery's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Rapid7 Inc |
| Predictive Discovery vs. Northern Star Resources | Predictive Discovery vs. Evolution Mining | Predictive Discovery vs. Bluescope Steel | Predictive Discovery vs. Sandfire Resources NL |
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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