Correlation Between Microsoft and Spectra Systems
Can any of the company-specific risk be diversified away by investing in both Microsoft and Spectra Systems 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 Spectra Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Spectra Systems Corp, you can compare the effects of market volatilities on Microsoft and Spectra Systems 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 Spectra Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Spectra Systems.
Diversification Opportunities for Microsoft and Spectra Systems
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Spectra is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Spectra Systems Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectra Systems Corp 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 Spectra Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectra Systems Corp has no effect on the direction of Microsoft i.e., Microsoft and Spectra Systems go up and down completely randomly.
Pair Corralation between Microsoft and Spectra Systems
Given the investment horizon of 90 days Microsoft is expected to under-perform the Spectra Systems. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.5 times less risky than Spectra Systems. The stock trades about -0.04 of its potential returns per unit of risk. The Spectra Systems Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 25,300 in Spectra Systems Corp on August 25, 2024 and sell it today you would earn a total of 0.00 from holding Spectra Systems Corp or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Spectra Systems Corp
Performance |
| Timeline |
| Microsoft |
| Spectra Systems Corp |
Microsoft and Spectra Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Spectra Systems
The main advantage of trading using opposite Microsoft and Spectra Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Spectra Systems 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 Spectra Systems will offset losses from the drop in Spectra Systems' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Spectra Systems vs. Eastinco Mining Exploration | Spectra Systems vs. Made Tech Group | Spectra Systems vs. Check Point Software | Spectra Systems vs. Accsys Technologies PLC |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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