Correlation Between Microsoft and Hoya Capital
Can any of the company-specific risk be diversified away by investing in both Microsoft and Hoya 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 Hoya Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Hoya Capital High, you can compare the effects of market volatilities on Microsoft and Hoya 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 Hoya Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Hoya Capital.
Diversification Opportunities for Microsoft and Hoya Capital
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microsoft and Hoya is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Hoya Capital High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hoya Capital High 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 Hoya Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hoya Capital High has no effect on the direction of Microsoft i.e., Microsoft and Hoya Capital go up and down completely randomly.
Pair Corralation between Microsoft and Hoya Capital
Given the investment horizon of 90 days Microsoft is expected to generate 1.7 times more return on investment than Hoya Capital. However, Microsoft is 1.7 times more volatile than Hoya Capital High. It trades about -0.02 of its potential returns per unit of risk. Hoya Capital High is currently generating about -0.05 per unit of risk. If you would invest 42,944 in Microsoft on August 30, 2024 and sell it today you would lose (645.00) from holding Microsoft or give up 1.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Hoya Capital High
Performance |
| Timeline |
| Microsoft |
| Hoya Capital High |
Microsoft and Hoya Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Hoya Capital
The main advantage of trading using opposite Microsoft and Hoya Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Hoya 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 Hoya Capital will offset losses from the drop in Hoya Capital's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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