Correlation Between Microsoft and Vow ASA
Can any of the company-specific risk be diversified away by investing in both Microsoft and Vow ASA 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 Vow ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Vow ASA, you can compare the effects of market volatilities on Microsoft and Vow ASA 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 Vow ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Vow ASA.
Diversification Opportunities for Microsoft and Vow ASA
Very good diversification
The 3 months correlation between Microsoft and Vow is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Vow ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vow ASA 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 Vow ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vow ASA has no effect on the direction of Microsoft i.e., Microsoft and Vow ASA go up and down completely randomly.
Pair Corralation between Microsoft and Vow ASA
Given the investment horizon of 90 days Microsoft is expected to generate 0.2 times more return on investment than Vow ASA. However, Microsoft is 4.9 times less risky than Vow ASA. It trades about -0.04 of its potential returns per unit of risk. Vow ASA is currently generating about -0.2 per unit of risk. If you would invest 42,574 in Microsoft on August 28, 2024 and sell it today you would lose (695.00) from holding Microsoft or give up 1.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Vow ASA
Performance |
| Timeline |
| Microsoft |
| Vow ASA |
Microsoft and Vow ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Vow ASA
The main advantage of trading using opposite Microsoft and Vow ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Vow ASA 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 Vow ASA will offset losses from the drop in Vow ASA's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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