Correlation Between Microsoft and Steward Large
Can any of the company-specific risk be diversified away by investing in both Microsoft and Steward Large 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 Steward Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Steward Large Cap, you can compare the effects of market volatilities on Microsoft and Steward Large 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 Steward Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Steward Large.
Diversification Opportunities for Microsoft and Steward Large
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Steward is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Steward Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steward Large Cap 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 Steward Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steward Large Cap has no effect on the direction of Microsoft i.e., Microsoft and Steward Large go up and down completely randomly.
Pair Corralation between Microsoft and Steward Large
Given the investment horizon of 90 days Microsoft is expected to generate 1.47 times more return on investment than Steward Large. However, Microsoft is 1.47 times more volatile than Steward Large Cap. It trades about 0.08 of its potential returns per unit of risk. Steward Large Cap is currently generating about 0.11 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. Steward Large Cap
Performance |
| Timeline |
| Microsoft |
| Steward Large Cap |
Microsoft and Steward Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Steward Large
The main advantage of trading using opposite Microsoft and Steward Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Steward Large 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 Steward Large will offset losses from the drop in Steward Large's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Steward Large vs. Steward Small Mid Cap | Steward Large vs. Steward Small Mid Cap | Steward Large vs. Steward Ered Call | Steward Large vs. Steward Ered Call |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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