Correlation Between Microsoft and Strategy Shares
Can any of the company-specific risk be diversified away by investing in both Microsoft and Strategy Shares 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 Strategy Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Strategy Shares NewfoundReSolve, you can compare the effects of market volatilities on Microsoft and Strategy Shares 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 Strategy Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Strategy Shares.
Diversification Opportunities for Microsoft and Strategy Shares
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Microsoft and Strategy is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Strategy Shares NewfoundReSolv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategy Shares Newf 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 Strategy Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategy Shares Newf has no effect on the direction of Microsoft i.e., Microsoft and Strategy Shares go up and down completely randomly.
Pair Corralation between Microsoft and Strategy Shares
Given the investment horizon of 90 days Microsoft is expected to generate 2.1 times more return on investment than Strategy Shares. However, Microsoft is 2.1 times more volatile than Strategy Shares NewfoundReSolve. It trades about 0.08 of its potential returns per unit of risk. Strategy Shares NewfoundReSolve is currently generating about 0.09 per unit of risk. If you would invest 24,616 in Microsoft on August 26, 2024 and sell it today you would earn a total of 17,084 from holding Microsoft or generate 69.4% 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. Strategy Shares NewfoundReSolv
Performance |
| Timeline |
| Microsoft |
| Strategy Shares Newf |
Microsoft and Strategy Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Strategy Shares
The main advantage of trading using opposite Microsoft and Strategy Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Strategy Shares 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 Strategy Shares will offset losses from the drop in Strategy Shares' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Strategy Shares vs. Cambria Trinity ETF | Strategy Shares vs. Northern Lights | Strategy Shares vs. Cambria Global Momentum | Strategy Shares vs. Alpha Architect Value |
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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