Correlation Between Microsoft and Main Thematic
Can any of the company-specific risk be diversified away by investing in both Microsoft and Main Thematic 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 Main Thematic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Main Thematic Innovation, you can compare the effects of market volatilities on Microsoft and Main Thematic 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 Main Thematic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Main Thematic.
Diversification Opportunities for Microsoft and Main Thematic
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Main is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Main Thematic Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Main Thematic Innovation 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 Main Thematic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Main Thematic Innovation has no effect on the direction of Microsoft i.e., Microsoft and Main Thematic go up and down completely randomly.
Pair Corralation between Microsoft and Main Thematic
Given the investment horizon of 90 days Microsoft is expected to generate 0.91 times more return on investment than Main Thematic. However, Microsoft is 1.09 times less risky than Main Thematic. It trades about 0.08 of its potential returns per unit of risk. Main Thematic Innovation is currently generating about 0.07 per unit of risk. If you would invest 24,116 in Microsoft on August 27, 2024 and sell it today you would earn a total of 17,584 from holding Microsoft or generate 72.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Main Thematic Innovation
Performance |
| Timeline |
| Microsoft |
| Main Thematic Innovation |
Microsoft and Main Thematic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Main Thematic
The main advantage of trading using opposite Microsoft and Main Thematic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Main Thematic 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 Main Thematic will offset losses from the drop in Main Thematic's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Rapid7 Inc |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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