Correlation Between Microsoft and RTL Group
Can any of the company-specific risk be diversified away by investing in both Microsoft and RTL Group 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 RTL Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and RTL Group SA, you can compare the effects of market volatilities on Microsoft and RTL Group 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 RTL Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and RTL Group.
Diversification Opportunities for Microsoft and RTL Group
Average diversification
The 3 months correlation between Microsoft and RTL is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and RTL Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RTL Group SA 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 RTL Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RTL Group SA has no effect on the direction of Microsoft i.e., Microsoft and RTL Group go up and down completely randomly.
Pair Corralation between Microsoft and RTL Group
Given the investment horizon of 90 days Microsoft is expected to generate 0.84 times more return on investment than RTL Group. However, Microsoft is 1.19 times less risky than RTL Group. It trades about -0.04 of its potential returns per unit of risk. RTL Group SA is currently generating about -0.27 per unit of risk. If you would invest 42,574 in Microsoft on August 28, 2024 and sell it today you would lose (695.00) from holding Microsoft or give up 1.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Microsoft vs. RTL Group SA
Performance |
| Timeline |
| Microsoft |
| RTL Group SA |
Microsoft and RTL Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and RTL Group
The main advantage of trading using opposite Microsoft and RTL Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, RTL Group 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 RTL Group will offset losses from the drop in RTL Group's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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