Correlation Between Microsoft and SolarEdge Technologies
Can any of the company-specific risk be diversified away by investing in both Microsoft and SolarEdge Technologies 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 SolarEdge Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and SolarEdge Technologies, you can compare the effects of market volatilities on Microsoft and SolarEdge Technologies 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 SolarEdge Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and SolarEdge Technologies.
Diversification Opportunities for Microsoft and SolarEdge Technologies
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and SolarEdge is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SolarEdge Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SolarEdge Technologies 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 SolarEdge Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SolarEdge Technologies has no effect on the direction of Microsoft i.e., Microsoft and SolarEdge Technologies go up and down completely randomly.
Pair Corralation between Microsoft and SolarEdge Technologies
Given the investment horizon of 90 days Microsoft is expected to generate 0.22 times more return on investment than SolarEdge Technologies. However, Microsoft is 4.48 times less risky than SolarEdge Technologies. It trades about -0.06 of its potential returns per unit of risk. SolarEdge Technologies is currently generating about -0.16 per unit of risk. If you would invest 42,375 in Microsoft on August 24, 2024 and sell it today you would lose (1,088) from holding Microsoft or give up 2.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. SolarEdge Technologies
Performance |
| Timeline |
| Microsoft |
| SolarEdge Technologies |
Microsoft and SolarEdge Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and SolarEdge Technologies
The main advantage of trading using opposite Microsoft and SolarEdge Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, SolarEdge Technologies 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 SolarEdge Technologies will offset losses from the drop in SolarEdge Technologies' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| SolarEdge Technologies vs. Small Cap Core | SolarEdge Technologies vs. Freedom Holding Corp | SolarEdge Technologies vs. Gfl Environmental Holdings | SolarEdge Technologies vs. Growth Fund Of |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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