Correlation Between Microsoft and Polaris Infrastructure
Can any of the company-specific risk be diversified away by investing in both Microsoft and Polaris Infrastructure 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 Polaris Infrastructure into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Polaris Infrastructure, you can compare the effects of market volatilities on Microsoft and Polaris Infrastructure 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 Polaris Infrastructure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Polaris Infrastructure.
Diversification Opportunities for Microsoft and Polaris Infrastructure
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Microsoft and Polaris is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Polaris Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polaris Infrastructure 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 Polaris Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polaris Infrastructure has no effect on the direction of Microsoft i.e., Microsoft and Polaris Infrastructure go up and down completely randomly.
Pair Corralation between Microsoft and Polaris Infrastructure
Given the investment horizon of 90 days Microsoft is expected to generate 1.43 times more return on investment than Polaris Infrastructure. However, Microsoft is 1.43 times more volatile than Polaris Infrastructure. It trades about 0.06 of its potential returns per unit of risk. Polaris Infrastructure is currently generating about -0.1 per unit of risk. If you would invest 43,933 in Microsoft on October 25, 2024 and sell it today you would earn a total of 687.00 from holding Microsoft or generate 1.56% 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. Polaris Infrastructure
Performance |
| Timeline |
| Microsoft |
| Polaris Infrastructure |
Microsoft and Polaris Infrastructure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Polaris Infrastructure
The main advantage of trading using opposite Microsoft and Polaris Infrastructure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Polaris Infrastructure 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 Polaris Infrastructure will offset losses from the drop in Polaris Infrastructure's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. BLOCK INC | Microsoft vs. Adobe Systems Incorporated |
| Polaris Infrastructure vs. Innergex Renewable Energy | Polaris Infrastructure vs. Boralex | Polaris Infrastructure vs. Northland Power |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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