Correlation Between Microsoft and RMB Holdings
Can any of the company-specific risk be diversified away by investing in both Microsoft and RMB Holdings 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 RMB Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and RMB Holdings, you can compare the effects of market volatilities on Microsoft and RMB Holdings 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 RMB Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and RMB Holdings.
Diversification Opportunities for Microsoft and RMB Holdings
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and RMB is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and RMB Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RMB Holdings 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 RMB Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RMB Holdings has no effect on the direction of Microsoft i.e., Microsoft and RMB Holdings go up and down completely randomly.
Pair Corralation between Microsoft and RMB Holdings
Given the investment horizon of 90 days Microsoft is expected to generate 0.6 times more return on investment than RMB Holdings. However, Microsoft is 1.66 times less risky than RMB Holdings. It trades about 0.15 of its potential returns per unit of risk. RMB Holdings is currently generating about 0.07 per unit of risk. If you would invest 40,955 in Microsoft on September 2, 2024 and sell it today you would earn a total of 1,391 from holding Microsoft or generate 3.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Microsoft vs. RMB Holdings
Performance |
| Timeline |
| Microsoft |
| RMB Holdings |
Microsoft and RMB Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and RMB Holdings
The main advantage of trading using opposite Microsoft and RMB Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, RMB Holdings 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 RMB Holdings will offset losses from the drop in RMB Holdings' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| RMB Holdings vs. African Media Entertainment | RMB Holdings vs. ABSA Bank Limited | RMB Holdings vs. eMedia Holdings Limited | RMB Holdings vs. HomeChoice Investments |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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