Correlation Between Microsoft and Village Super
Can any of the company-specific risk be diversified away by investing in both Microsoft and Village Super 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 Village Super into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Village Super Market, you can compare the effects of market volatilities on Microsoft and Village Super 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 Village Super. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Village Super.
Diversification Opportunities for Microsoft and Village Super
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Village is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Village Super Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Village Super Market 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 Village Super. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Village Super Market has no effect on the direction of Microsoft i.e., Microsoft and Village Super go up and down completely randomly.
Pair Corralation between Microsoft and Village Super
Given the investment horizon of 90 days Microsoft is expected to under-perform the Village Super. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.04 times less risky than Village Super. The stock trades about -0.06 of its potential returns per unit of risk. The Village Super Market is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,043 in Village Super Market on August 24, 2024 and sell it today you would earn a total of 149.00 from holding Village Super Market or generate 4.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Village Super Market
Performance |
| Timeline |
| Microsoft |
| Village Super Market |
Microsoft and Village Super Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Village Super
The main advantage of trading using opposite Microsoft and Village Super positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Village Super 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 Village Super will offset losses from the drop in Village Super's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Village Super vs. Natural Grocers by | Village Super vs. Ingles Markets Incorporated | Village Super vs. Ocado Group plc | Village Super vs. Weis Markets |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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