Correlation Between Microsoft and Stampede Drilling
Can any of the company-specific risk be diversified away by investing in both Microsoft and Stampede Drilling 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 Stampede Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Stampede Drilling, you can compare the effects of market volatilities on Microsoft and Stampede Drilling 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 Stampede Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Stampede Drilling.
Diversification Opportunities for Microsoft and Stampede Drilling
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Stampede is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Stampede Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stampede Drilling 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 Stampede Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stampede Drilling has no effect on the direction of Microsoft i.e., Microsoft and Stampede Drilling go up and down completely randomly.
Pair Corralation between Microsoft and Stampede Drilling
Given the investment horizon of 90 days Microsoft is expected to generate 0.57 times more return on investment than Stampede Drilling. However, Microsoft is 1.74 times less risky than Stampede Drilling. It trades about -0.06 of its potential returns per unit of risk. Stampede Drilling is currently generating about -0.13 per unit of risk. If you would invest 42,729 in Microsoft on August 26, 2024 and sell it today you would lose (1,029) from holding Microsoft or give up 2.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Stampede Drilling
Performance |
| Timeline |
| Microsoft |
| Stampede Drilling |
Microsoft and Stampede Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Stampede Drilling
The main advantage of trading using opposite Microsoft and Stampede Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Stampede Drilling 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 Stampede Drilling will offset losses from the drop in Stampede Drilling's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Rapid7 Inc |
| Stampede Drilling vs. STEP Energy Services | Stampede Drilling vs. Southern Energy Corp | Stampede Drilling vs. PHX Energy Services |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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