Correlation Between Microsoft and Tikun Olam
Can any of the company-specific risk be diversified away by investing in both Microsoft and Tikun Olam 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 Tikun Olam into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Tikun Olam Cannbit, you can compare the effects of market volatilities on Microsoft and Tikun Olam 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 Tikun Olam. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Tikun Olam.
Diversification Opportunities for Microsoft and Tikun Olam
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Tikun is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Tikun Olam Cannbit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tikun Olam Cannbit 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 Tikun Olam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tikun Olam Cannbit has no effect on the direction of Microsoft i.e., Microsoft and Tikun Olam go up and down completely randomly.
Pair Corralation between Microsoft and Tikun Olam
Given the investment horizon of 90 days Microsoft is expected to under-perform the Tikun Olam. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.33 times less risky than Tikun Olam. The stock trades about -0.07 of its potential returns per unit of risk. The Tikun Olam Cannbit is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 3,720 in Tikun Olam Cannbit on December 3, 2024 and sell it today you would lose (200.00) from holding Tikun Olam Cannbit or give up 5.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 85.0% |
| Values | Daily Returns |
Microsoft vs. Tikun Olam Cannbit
Performance |
| Timeline |
| Microsoft |
| Tikun Olam Cannbit |
Microsoft and Tikun Olam Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Tikun Olam
The main advantage of trading using opposite Microsoft and Tikun Olam positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Tikun Olam 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 Tikun Olam will offset losses from the drop in Tikun Olam's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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