Correlation Between Microsoft and CPI Card
Can any of the company-specific risk be diversified away by investing in both Microsoft and CPI Card 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 CPI Card into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and CPI Card Group, you can compare the effects of market volatilities on Microsoft and CPI Card 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 CPI Card. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and CPI Card.
Diversification Opportunities for Microsoft and CPI Card
Average diversification
The 3 months correlation between Microsoft and CPI is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and CPI Card Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPI Card Group 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 CPI Card. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPI Card Group has no effect on the direction of Microsoft i.e., Microsoft and CPI Card go up and down completely randomly.
Pair Corralation between Microsoft and CPI Card
Given the investment horizon of 90 days Microsoft is expected to under-perform the CPI Card. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.95 times less risky than CPI Card. The stock trades about -0.04 of its potential returns per unit of risk. The CPI Card Group is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest 2,284 in CPI Card Group on August 31, 2024 and sell it today you would earn a total of 773.00 from holding CPI Card Group or generate 33.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. CPI Card Group
Performance |
| Timeline |
| Microsoft |
| CPI Card Group |
Microsoft and CPI Card Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and CPI Card
The main advantage of trading using opposite Microsoft and CPI Card positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, CPI Card 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 CPI Card will offset losses from the drop in CPI Card's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| CPI Card vs. FirstCash | CPI Card vs. Runway Growth Finance | CPI Card vs. Credit Acceptance | CPI Card vs. SLM Corp |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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