Correlation Between Microsoft and Vestas Wind
Can any of the company-specific risk be diversified away by investing in both Microsoft and Vestas Wind 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 Vestas Wind into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Vestas Wind Systems, you can compare the effects of market volatilities on Microsoft and Vestas Wind 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 Vestas Wind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Vestas Wind.
Diversification Opportunities for Microsoft and Vestas Wind
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Vestas is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Vestas Wind Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestas Wind Systems 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 Vestas Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestas Wind Systems has no effect on the direction of Microsoft i.e., Microsoft and Vestas Wind go up and down completely randomly.
Pair Corralation between Microsoft and Vestas Wind
Given the investment horizon of 90 days Microsoft is expected to generate 0.4 times more return on investment than Vestas Wind. However, Microsoft is 2.52 times less risky than Vestas Wind. It trades about -0.04 of its potential returns per unit of risk. Vestas Wind Systems is currently generating about -0.23 per unit of risk. If you would invest 43,167 in Microsoft on August 31, 2024 and sell it today you would lose (868.00) from holding Microsoft or give up 2.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Vestas Wind Systems
Performance |
| Timeline |
| Microsoft |
| Vestas Wind Systems |
Microsoft and Vestas Wind Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Vestas Wind
The main advantage of trading using opposite Microsoft and Vestas Wind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Vestas Wind 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 Vestas Wind will offset losses from the drop in Vestas Wind's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Vestas Wind vs. Kone Oyj ADR | Vestas Wind vs. Schneider Electric SE | Vestas Wind vs. Schneider Electric SA | Vestas Wind vs. Fanuc |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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