Correlation Between Microsoft and United Bankshares
Can any of the company-specific risk be diversified away by investing in both Microsoft and United Bankshares 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 United Bankshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and United Bankshares, you can compare the effects of market volatilities on Microsoft and United Bankshares 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 United Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and United Bankshares.
Diversification Opportunities for Microsoft and United Bankshares
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and United is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and United Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Bankshares 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 United Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Bankshares has no effect on the direction of Microsoft i.e., Microsoft and United Bankshares go up and down completely randomly.
Pair Corralation between Microsoft and United Bankshares
Given the investment horizon of 90 days Microsoft is expected to under-perform the United Bankshares. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.77 times less risky than United Bankshares. The stock trades about -0.04 of its potential returns per unit of risk. The United Bankshares is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 3,824 in United Bankshares on August 31, 2024 and sell it today you would earn a total of 425.00 from holding United Bankshares or generate 11.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. United Bankshares
Performance |
| Timeline |
| Microsoft |
| United Bankshares |
Microsoft and United Bankshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and United Bankshares
The main advantage of trading using opposite Microsoft and United Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, United Bankshares 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 United Bankshares will offset losses from the drop in United Bankshares' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| United Bankshares vs. Peoples Bancorp | United Bankshares vs. Eagle Bancorp | United Bankshares vs. Northrim BanCorp | United Bankshares vs. Pacific Premier Bancorp |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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