Correlation Between Microsoft and Real Matters
Can any of the company-specific risk be diversified away by investing in both Microsoft and Real Matters 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 Real Matters into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Real Matters, you can compare the effects of market volatilities on Microsoft and Real Matters 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 Real Matters. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Real Matters.
Diversification Opportunities for Microsoft and Real Matters
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Real is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Real Matters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Matters 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 Real Matters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Matters has no effect on the direction of Microsoft i.e., Microsoft and Real Matters go up and down completely randomly.
Pair Corralation between Microsoft and Real Matters
Given the investment horizon of 90 days Microsoft is expected to generate 0.7 times more return on investment than Real Matters. However, Microsoft is 1.42 times less risky than Real Matters. It trades about 0.02 of its potential returns per unit of risk. Real Matters is currently generating about -0.22 per unit of risk. If you would invest 42,574 in Microsoft on August 28, 2024 and sell it today you would earn a total of 225.00 from holding Microsoft or generate 0.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Real Matters
Performance |
| Timeline |
| Microsoft |
| Real Matters |
Microsoft and Real Matters Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Real Matters
The main advantage of trading using opposite Microsoft and Real Matters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Real Matters 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 Real Matters will offset losses from the drop in Real Matters' long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| Real Matters vs. Kinaxis | Real Matters vs. Docebo Inc | Real Matters vs. Enghouse Systems | Real Matters vs. Dye Durham |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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