Correlation Between Microsoft and Stet California
Can any of the company-specific risk be diversified away by investing in both Microsoft and Stet California 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 Stet California into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Stet California Municipal, you can compare the effects of market volatilities on Microsoft and Stet California 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 Stet California. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Stet California.
Diversification Opportunities for Microsoft and Stet California
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Stet is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Stet California Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stet California Municipal 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 Stet California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stet California Municipal has no effect on the direction of Microsoft i.e., Microsoft and Stet California go up and down completely randomly.
Pair Corralation between Microsoft and Stet California
Given the investment horizon of 90 days Microsoft is expected to generate 7.69 times more return on investment than Stet California. However, Microsoft is 7.69 times more volatile than Stet California Municipal. It trades about 0.09 of its potential returns per unit of risk. Stet California Municipal is currently generating about 0.05 per unit of risk. If you would invest 24,146 in Microsoft on August 30, 2024 and sell it today you would earn a total of 18,153 from holding Microsoft or generate 75.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Stet California Municipal
Performance |
| Timeline |
| Microsoft |
| Stet California Municipal |
Microsoft and Stet California Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Stet California
The main advantage of trading using opposite Microsoft and Stet California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Stet California 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 Stet California will offset losses from the drop in Stet California's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Stet California vs. Copeland Risk Managed | Stet California vs. Morningstar Aggressive Growth | Stet California vs. Pace High Yield | Stet California vs. California High Yield Municipal |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
Other Complementary Tools
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges |