Correlation Between Microsoft and Renesas Electronics
Can any of the company-specific risk be diversified away by investing in both Microsoft and Renesas Electronics 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 Renesas Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Renesas Electronics, you can compare the effects of market volatilities on Microsoft and Renesas Electronics 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 Renesas Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Renesas Electronics.
Diversification Opportunities for Microsoft and Renesas Electronics
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Renesas is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Renesas Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renesas Electronics 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 Renesas Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renesas Electronics has no effect on the direction of Microsoft i.e., Microsoft and Renesas Electronics go up and down completely randomly.
Pair Corralation between Microsoft and Renesas Electronics
Given the investment horizon of 90 days Microsoft is expected to under-perform the Renesas Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 3.07 times less risky than Renesas Electronics. The stock trades about -0.04 of its potential returns per unit of risk. The Renesas Electronics is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,372 in Renesas Electronics on August 28, 2024 and sell it today you would lose (1.00) from holding Renesas Electronics or give up 0.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Renesas Electronics
Performance |
| Timeline |
| Microsoft |
| Renesas Electronics |
Microsoft and Renesas Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Renesas Electronics
The main advantage of trading using opposite Microsoft and Renesas Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Renesas Electronics 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 Renesas Electronics will offset losses from the drop in Renesas Electronics' 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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