Correlation Between Microsoft and Step One
Can any of the company-specific risk be diversified away by investing in both Microsoft and Step One 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 Step One into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Step One Clothing, you can compare the effects of market volatilities on Microsoft and Step One 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 Step One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Step One.
Diversification Opportunities for Microsoft and Step One
Modest diversification
The 3 months correlation between Microsoft and Step is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Step One Clothing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Step One Clothing 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 Step One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Step One Clothing has no effect on the direction of Microsoft i.e., Microsoft and Step One go up and down completely randomly.
Pair Corralation between Microsoft and Step One
Given the investment horizon of 90 days Microsoft is expected to generate 0.58 times more return on investment than Step One. However, Microsoft is 1.72 times less risky than Step One. It trades about -0.04 of its potential returns per unit of risk. Step One Clothing is currently generating about -0.1 per unit of risk. If you would invest 43,167 in Microsoft on August 31, 2024 and sell it today you would lose (821.00) from holding Microsoft or give up 1.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Step One Clothing
Performance |
| Timeline |
| Microsoft |
| Step One Clothing |
Microsoft and Step One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Step One
The main advantage of trading using opposite Microsoft and Step One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Step One 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 Step One will offset losses from the drop in Step One's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Step One vs. Aneka Tambang Tbk | Step One vs. Unibail Rodamco Westfield SE | Step One vs. Macquarie Group | Step One vs. Commonwealth Bank |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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