Correlation Between Microsoft and Planet 13
Can any of the company-specific risk be diversified away by investing in both Microsoft and Planet 13 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 Planet 13 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Planet 13 Holdings, you can compare the effects of market volatilities on Microsoft and Planet 13 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 Planet 13. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Planet 13.
Diversification Opportunities for Microsoft and Planet 13
Very good diversification
The 3 months correlation between Microsoft and Planet is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Planet 13 Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Planet 13 Holdings 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 Planet 13. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Planet 13 Holdings has no effect on the direction of Microsoft i.e., Microsoft and Planet 13 go up and down completely randomly.
Pair Corralation between Microsoft and Planet 13
Given the investment horizon of 90 days Microsoft is expected to generate 0.2 times more return on investment than Planet 13. However, Microsoft is 4.98 times less risky than Planet 13. It trades about 0.32 of its potential returns per unit of risk. Planet 13 Holdings is currently generating about -0.08 per unit of risk. If you would invest 41,718 in Microsoft on September 12, 2024 and sell it today you would earn a total of 3,182 from holding Microsoft or generate 7.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Planet 13 Holdings
Performance |
| Timeline |
| Microsoft |
| Planet 13 Holdings |
Microsoft and Planet 13 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Planet 13
The main advantage of trading using opposite Microsoft and Planet 13 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Planet 13 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 Planet 13 will offset losses from the drop in Planet 13's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Planet 13 vs. Skechers USA | Planet 13 vs. Mediag3 | Planet 13 vs. Procter Gamble | Planet 13 vs. Steven Madden |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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