Correlation Between Microsoft and Telus Corp
Can any of the company-specific risk be diversified away by investing in both Microsoft and Telus Corp 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 Telus Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Telus Corp, you can compare the effects of market volatilities on Microsoft and Telus Corp 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 Telus Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Telus Corp.
Diversification Opportunities for Microsoft and Telus Corp
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and Telus is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Telus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telus 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 Telus Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telus Corp has no effect on the direction of Microsoft i.e., Microsoft and Telus Corp go up and down completely randomly.
Pair Corralation between Microsoft and Telus Corp
Given the investment horizon of 90 days Microsoft is expected to generate 1.3 times more return on investment than Telus Corp. However, Microsoft is 1.3 times more volatile than Telus Corp. It trades about -0.04 of its potential returns per unit of risk. Telus Corp is currently generating about -0.13 per unit of risk. If you would invest 42,574 in Microsoft on August 28, 2024 and sell it today you would lose (695.00) from holding Microsoft or give up 1.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Telus Corp
Performance |
| Timeline |
| Microsoft |
| Telus Corp |
Microsoft and Telus Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Telus Corp
The main advantage of trading using opposite Microsoft and Telus Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Telus Corp 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 Telus Corp will offset losses from the drop in Telus Corp's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| Telus Corp vs. BCE Inc | Telus Corp vs. Fortis Inc | Telus Corp vs. Enbridge | Telus Corp vs. Toronto Dominion 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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