Correlation Between Microsoft and PolyPid
Can any of the company-specific risk be diversified away by investing in both Microsoft and PolyPid 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 PolyPid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and PolyPid, you can compare the effects of market volatilities on Microsoft and PolyPid 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 PolyPid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and PolyPid.
Diversification Opportunities for Microsoft and PolyPid
Average diversification
The 3 months correlation between Microsoft and PolyPid is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and PolyPid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PolyPid 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 PolyPid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PolyPid has no effect on the direction of Microsoft i.e., Microsoft and PolyPid go up and down completely randomly.
Pair Corralation between Microsoft and PolyPid
Given the investment horizon of 90 days Microsoft is expected to generate 4.34 times less return on investment than PolyPid. But when comparing it to its historical volatility, Microsoft is 1.84 times less risky than PolyPid. It trades about 0.02 of its potential returns per unit of risk. PolyPid is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 342.00 in PolyPid on August 29, 2024 and sell it today you would earn a total of 9.00 from holding PolyPid or generate 2.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. PolyPid
Performance |
| Timeline |
| Microsoft |
| PolyPid |
Microsoft and PolyPid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and PolyPid
The main advantage of trading using opposite Microsoft and PolyPid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, PolyPid 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 PolyPid will offset losses from the drop in PolyPid'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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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