Correlation Between Microsoft and EA Series
Can any of the company-specific risk be diversified away by investing in both Microsoft and EA Series 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 EA Series into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and EA Series Trust, you can compare the effects of market volatilities on Microsoft and EA Series 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 EA Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and EA Series.
Diversification Opportunities for Microsoft and EA Series
Weak diversification
The 3 months correlation between Microsoft and STXE is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and EA Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EA Series Trust 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 EA Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EA Series Trust has no effect on the direction of Microsoft i.e., Microsoft and EA Series go up and down completely randomly.
Pair Corralation between Microsoft and EA Series
Given the investment horizon of 90 days Microsoft is expected to generate 1.32 times more return on investment than EA Series. However, Microsoft is 1.32 times more volatile than EA Series Trust. It trades about 0.02 of its potential returns per unit of risk. EA Series Trust is currently generating about 0.02 per unit of risk. If you would invest 41,195 in Microsoft on September 1, 2024 and sell it today you would earn a total of 1,151 from holding Microsoft or generate 2.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Microsoft vs. EA Series Trust
Performance |
| Timeline |
| Microsoft |
| EA Series Trust |
Microsoft and EA Series Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and EA Series
The main advantage of trading using opposite Microsoft and EA Series positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, EA Series 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 EA Series will offset losses from the drop in EA Series' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| EA Series vs. Xtrackers MSCI Emerging | EA Series vs. FlexShares Morningstar Emerging | EA Series vs. First Trust Emerging |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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