Correlation Between Microsoft and Starfleet Innotech
Can any of the company-specific risk be diversified away by investing in both Microsoft and Starfleet Innotech 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 Starfleet Innotech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Starfleet Innotech, you can compare the effects of market volatilities on Microsoft and Starfleet Innotech 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 Starfleet Innotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Starfleet Innotech.
Diversification Opportunities for Microsoft and Starfleet Innotech
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Starfleet is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Starfleet Innotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starfleet Innotech 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 Starfleet Innotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starfleet Innotech has no effect on the direction of Microsoft i.e., Microsoft and Starfleet Innotech go up and down completely randomly.
Pair Corralation between Microsoft and Starfleet Innotech
Given the investment horizon of 90 days Microsoft is expected to under-perform the Starfleet Innotech. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 12.53 times less risky than Starfleet Innotech. The stock trades about -0.04 of its potential returns per unit of risk. The Starfleet Innotech is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 0.19 in Starfleet Innotech on August 28, 2024 and sell it today you would earn a total of 0.17 from holding Starfleet Innotech or generate 89.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Starfleet Innotech
Performance |
| Timeline |
| Microsoft |
| Starfleet Innotech |
Microsoft and Starfleet Innotech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Starfleet Innotech
The main advantage of trading using opposite Microsoft and Starfleet Innotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Starfleet Innotech 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 Starfleet Innotech will offset losses from the drop in Starfleet Innotech's 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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