Correlation Between Microsoft and Eureka Design
Can any of the company-specific risk be diversified away by investing in both Microsoft and Eureka Design 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 Eureka Design into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Eureka Design Public, you can compare the effects of market volatilities on Microsoft and Eureka Design 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 Eureka Design. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Eureka Design.
Diversification Opportunities for Microsoft and Eureka Design
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Microsoft and Eureka is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Eureka Design Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eureka Design Public 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 Eureka Design. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eureka Design Public has no effect on the direction of Microsoft i.e., Microsoft and Eureka Design go up and down completely randomly.
Pair Corralation between Microsoft and Eureka Design
Given the investment horizon of 90 days Microsoft is expected to generate 0.43 times more return on investment than Eureka Design. However, Microsoft is 2.32 times less risky than Eureka Design. It trades about 0.08 of its potential returns per unit of risk. Eureka Design Public is currently generating about -0.03 per unit of risk. If you would invest 24,341 in Microsoft on August 29, 2024 and sell it today you would earn a total of 17,958 from holding Microsoft or generate 73.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.18% |
| Values | Daily Returns |
Microsoft vs. Eureka Design Public
Performance |
| Timeline |
| Microsoft |
| Eureka Design Public |
Microsoft and Eureka Design Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Eureka Design
The main advantage of trading using opposite Microsoft and Eureka Design positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Eureka Design 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 Eureka Design will offset losses from the drop in Eureka Design'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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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