Correlation Between Microsoft and Power Nickel
Can any of the company-specific risk be diversified away by investing in both Microsoft and Power Nickel 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 Power Nickel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Power Nickel, you can compare the effects of market volatilities on Microsoft and Power Nickel 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 Power Nickel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Power Nickel.
Diversification Opportunities for Microsoft and Power Nickel
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Power is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Power Nickel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Nickel 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 Power Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Nickel has no effect on the direction of Microsoft i.e., Microsoft and Power Nickel go up and down completely randomly.
Pair Corralation between Microsoft and Power Nickel
Given the investment horizon of 90 days Microsoft is expected to generate 5.55 times less return on investment than Power Nickel. But when comparing it to its historical volatility, Microsoft is 4.18 times less risky than Power Nickel. It trades about 0.06 of its potential returns per unit of risk. Power Nickel is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 17.00 in Power Nickel on August 31, 2024 and sell it today you would earn a total of 38.00 from holding Power Nickel or generate 223.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
Microsoft vs. Power Nickel
Performance |
| Timeline |
| Microsoft |
| Power Nickel |
Microsoft and Power Nickel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Power Nickel
The main advantage of trading using opposite Microsoft and Power Nickel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Power Nickel 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 Power Nickel will offset losses from the drop in Power Nickel's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Power Nickel vs. Legacy Education | Power Nickel vs. Apple Inc | Power Nickel vs. NVIDIA | Power Nickel vs. Microsoft |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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