Correlation Between Microsoft and Polymeric Resources
Can any of the company-specific risk be diversified away by investing in both Microsoft and Polymeric Resources 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 Polymeric Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Polymeric Resources, you can compare the effects of market volatilities on Microsoft and Polymeric Resources 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 Polymeric Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Polymeric Resources.
Diversification Opportunities for Microsoft and Polymeric Resources
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Polymeric is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Polymeric Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polymeric Resources 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 Polymeric Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polymeric Resources has no effect on the direction of Microsoft i.e., Microsoft and Polymeric Resources go up and down completely randomly.
Pair Corralation between Microsoft and Polymeric Resources
If you would invest 40,554 in Microsoft on September 1, 2024 and sell it today you would earn a total of 1,792 from holding Microsoft or generate 4.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Microsoft vs. Polymeric Resources
Performance |
| Timeline |
| Microsoft |
| Polymeric Resources |
Microsoft and Polymeric Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Polymeric Resources
The main advantage of trading using opposite Microsoft and Polymeric Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Polymeric Resources 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 Polymeric Resources will offset losses from the drop in Polymeric Resources' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Polymeric Resources vs. BASF SE NA | Polymeric Resources vs. Braskem SA Class | Polymeric Resources vs. Lsb Industries | Polymeric Resources vs. Dow Inc |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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