Correlation Between Microsoft and TOA PAINT
Can any of the company-specific risk be diversified away by investing in both Microsoft and TOA PAINT 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 TOA PAINT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and TOA PAINT, you can compare the effects of market volatilities on Microsoft and TOA PAINT 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 TOA PAINT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and TOA PAINT.
Diversification Opportunities for Microsoft and TOA PAINT
Significant diversification
The 3 months correlation between Microsoft and TOA is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and TOA PAINT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOA PAINT 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 TOA PAINT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOA PAINT has no effect on the direction of Microsoft i.e., Microsoft and TOA PAINT go up and down completely randomly.
Pair Corralation between Microsoft and TOA PAINT
Given the investment horizon of 90 days Microsoft is expected to generate 0.6 times more return on investment than TOA PAINT. However, Microsoft is 1.67 times less risky than TOA PAINT. It trades about 0.08 of its potential returns per unit of risk. TOA PAINT is currently generating about -0.05 per unit of risk. If you would invest 25,277 in Microsoft on September 3, 2024 and sell it today you would earn a total of 17,069 from holding Microsoft or generate 67.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.58% |
| Values | Daily Returns |
Microsoft vs. TOA PAINT
Performance |
| Timeline |
| Microsoft |
| TOA PAINT |
Microsoft and TOA PAINT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and TOA PAINT
The main advantage of trading using opposite Microsoft and TOA PAINT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, TOA PAINT 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 TOA PAINT will offset losses from the drop in TOA PAINT's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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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 Managers module to screen money managers from public funds and ETFs managed around the world.
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