Correlation Between Microsoft and Prevas AB
Can any of the company-specific risk be diversified away by investing in both Microsoft and Prevas AB 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 Prevas AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Prevas AB, you can compare the effects of market volatilities on Microsoft and Prevas AB 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 Prevas AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Prevas AB.
Diversification Opportunities for Microsoft and Prevas AB
Modest diversification
The 3 months correlation between Microsoft and Prevas is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Prevas AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prevas AB 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 Prevas AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prevas AB has no effect on the direction of Microsoft i.e., Microsoft and Prevas AB go up and down completely randomly.
Pair Corralation between Microsoft and Prevas AB
Given the investment horizon of 90 days Microsoft is expected to generate 1.63 times more return on investment than Prevas AB. However, Microsoft is 1.63 times more volatile than Prevas AB. It trades about -0.01 of its potential returns per unit of risk. Prevas AB is currently generating about -0.43 per unit of risk. If you would invest 41,858 in Microsoft on November 3, 2024 and sell it today you would lose (352.00) from holding Microsoft or give up 0.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Microsoft vs. Prevas AB
Performance |
| Timeline |
| Microsoft |
| Prevas AB |
Microsoft and Prevas AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Prevas AB
The main advantage of trading using opposite Microsoft and Prevas AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Prevas AB 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 Prevas AB will offset losses from the drop in Prevas AB's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| Prevas AB vs. Softronic AB | Prevas AB vs. Novotek AB | Prevas AB vs. Svedbergs i Dalstorp | Prevas AB vs. Know IT AB |
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 Stocks Directory module to find actively traded stocks across global markets.
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