Correlation Between Microsoft and Embracer Group
Can any of the company-specific risk be diversified away by investing in both Microsoft and Embracer Group 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 Embracer Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Embracer Group AB, you can compare the effects of market volatilities on Microsoft and Embracer Group 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 Embracer Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Embracer Group.
Diversification Opportunities for Microsoft and Embracer Group
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Microsoft and Embracer is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Embracer Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embracer Group AB 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 Embracer Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embracer Group AB has no effect on the direction of Microsoft i.e., Microsoft and Embracer Group go up and down completely randomly.
Pair Corralation between Microsoft and Embracer Group
Given the investment horizon of 90 days Microsoft is expected to generate 22.21 times less return on investment than Embracer Group. But when comparing it to its historical volatility, Microsoft is 2.23 times less risky than Embracer Group. It trades about 0.01 of its potential returns per unit of risk. Embracer Group AB is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,332 in Embracer Group AB on October 22, 2024 and sell it today you would earn a total of 396.00 from holding Embracer Group AB or generate 29.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.2% |
| Values | Daily Returns |
Microsoft vs. Embracer Group AB
Performance |
| Timeline |
| Microsoft |
| Embracer Group AB |
Microsoft and Embracer Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Embracer Group
The main advantage of trading using opposite Microsoft and Embracer Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Embracer Group 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 Embracer Group will offset losses from the drop in Embracer Group's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. BLOCK INC | Microsoft vs. Adobe Systems Incorporated |
| Embracer Group vs. Square Enix Holdings | Embracer Group vs. Capcom Co | Embracer Group vs. CD Projekt SA | Embracer Group vs. Sega Sammy Holdings |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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