Correlation Between Microsoft and Payden Absolute
Can any of the company-specific risk be diversified away by investing in both Microsoft and Payden Absolute 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 Payden Absolute into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Payden Absolute Return, you can compare the effects of market volatilities on Microsoft and Payden Absolute 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 Payden Absolute. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Payden Absolute.
Diversification Opportunities for Microsoft and Payden Absolute
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Payden is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Payden Absolute Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Absolute Return 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 Payden Absolute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Absolute Return has no effect on the direction of Microsoft i.e., Microsoft and Payden Absolute go up and down completely randomly.
Pair Corralation between Microsoft and Payden Absolute
Given the investment horizon of 90 days Microsoft is expected to generate 12.63 times more return on investment than Payden Absolute. However, Microsoft is 12.63 times more volatile than Payden Absolute Return. It trades about 0.07 of its potential returns per unit of risk. Payden Absolute Return is currently generating about 0.22 per unit of risk. If you would invest 30,123 in Microsoft on August 26, 2024 and sell it today you would earn a total of 11,577 from holding Microsoft or generate 38.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Payden Absolute Return
Performance |
| Timeline |
| Microsoft |
| Payden Absolute Return |
Microsoft and Payden Absolute Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Payden Absolute
The main advantage of trading using opposite Microsoft and Payden Absolute positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Payden Absolute 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 Payden Absolute will offset losses from the drop in Payden Absolute's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Payden Absolute vs. Payden Porate Bond | Payden Absolute vs. Payden Emerging Markets | Payden Absolute vs. The Payden Regal | Payden Absolute vs. Payden E Bond |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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