Correlation Between Microsoft and Prospector Capital
Can any of the company-specific risk be diversified away by investing in both Microsoft and Prospector Capital 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 Prospector Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Prospector Capital Equity, you can compare the effects of market volatilities on Microsoft and Prospector Capital 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 Prospector Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Prospector Capital.
Diversification Opportunities for Microsoft and Prospector Capital
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Prospector is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Prospector Capital Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prospector Capital Equity 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 Prospector Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prospector Capital Equity has no effect on the direction of Microsoft i.e., Microsoft and Prospector Capital go up and down completely randomly.
Pair Corralation between Microsoft and Prospector Capital
Given the investment horizon of 90 days Microsoft is expected to generate 43.67 times less return on investment than Prospector Capital. But when comparing it to its historical volatility, Microsoft is 19.57 times less risky than Prospector Capital. It trades about 0.07 of its potential returns per unit of risk. Prospector Capital Equity is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 3.63 in Prospector Capital Equity on August 29, 2024 and sell it today you would earn a total of 6.37 from holding Prospector Capital Equity or generate 175.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 13.49% |
| Values | Daily Returns |
Microsoft vs. Prospector Capital Equity
Performance |
| Timeline |
| Microsoft |
| Prospector Capital Equity |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Microsoft and Prospector Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Prospector Capital
The main advantage of trading using opposite Microsoft and Prospector Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Prospector Capital 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 Prospector Capital will offset losses from the drop in Prospector Capital's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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