Correlation Between Microsoft and Totens Sparebank
Can any of the company-specific risk be diversified away by investing in both Microsoft and Totens Sparebank 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 Totens Sparebank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Totens Sparebank, you can compare the effects of market volatilities on Microsoft and Totens Sparebank 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 Totens Sparebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Totens Sparebank.
Diversification Opportunities for Microsoft and Totens Sparebank
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Totens is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Totens Sparebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Totens Sparebank 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 Totens Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Totens Sparebank has no effect on the direction of Microsoft i.e., Microsoft and Totens Sparebank go up and down completely randomly.
Pair Corralation between Microsoft and Totens Sparebank
Given the investment horizon of 90 days Microsoft is expected to generate 1.14 times less return on investment than Totens Sparebank. But when comparing it to its historical volatility, Microsoft is 1.84 times less risky than Totens Sparebank. It trades about 0.09 of its potential returns per unit of risk. Totens Sparebank is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 17,435 in Totens Sparebank on August 29, 2024 and sell it today you would earn a total of 11,565 from holding Totens Sparebank or generate 66.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 96.16% |
| Values | Daily Returns |
Microsoft vs. Totens Sparebank
Performance |
| Timeline |
| Microsoft |
| Totens Sparebank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Microsoft and Totens Sparebank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Totens Sparebank
The main advantage of trading using opposite Microsoft and Totens Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Totens Sparebank 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 Totens Sparebank will offset losses from the drop in Totens Sparebank's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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