Correlation Between Microsoft and Element Solutions
Can any of the company-specific risk be diversified away by investing in both Microsoft and Element Solutions 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 Element Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Element Solutions, you can compare the effects of market volatilities on Microsoft and Element Solutions 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 Element Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Element Solutions.
Diversification Opportunities for Microsoft and Element Solutions
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Element is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Element Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Element Solutions 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 Element Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Element Solutions has no effect on the direction of Microsoft i.e., Microsoft and Element Solutions go up and down completely randomly.
Pair Corralation between Microsoft and Element Solutions
Given the investment horizon of 90 days Microsoft is expected to generate 0.89 times more return on investment than Element Solutions. However, Microsoft is 1.12 times less risky than Element Solutions. It trades about 0.16 of its potential returns per unit of risk. Element Solutions is currently generating about -0.41 per unit of risk. If you would invest 41,879 in Microsoft on September 24, 2024 and sell it today you would earn a total of 1,646 from holding Microsoft or generate 3.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Element Solutions
Performance |
| Timeline |
| Microsoft |
| Element Solutions |
Microsoft and Element Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Element Solutions
The main advantage of trading using opposite Microsoft and Element Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Element Solutions 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 Element Solutions will offset losses from the drop in Element Solutions' long position.| Microsoft vs. BlackBerry | Microsoft vs. Global Blue Group | Microsoft vs. Aurora Mobile | Microsoft vs. Marqeta |
| Element Solutions vs. JD SPORTS FASH | Element Solutions vs. PLAYTIKA HOLDING DL 01 | Element Solutions vs. Live Nation Entertainment | Element Solutions vs. Ubisoft Entertainment SA |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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