Correlation Between Microsoft and Wingstop
Can any of the company-specific risk be diversified away by investing in both Microsoft and Wingstop 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 Wingstop into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Wingstop, you can compare the effects of market volatilities on Microsoft and Wingstop 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 Wingstop. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Wingstop.
Diversification Opportunities for Microsoft and Wingstop
Weak diversification
The 3 months correlation between Microsoft and Wingstop is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Wingstop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wingstop 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 Wingstop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wingstop has no effect on the direction of Microsoft i.e., Microsoft and Wingstop go up and down completely randomly.
Pair Corralation between Microsoft and Wingstop
Given the investment horizon of 90 days Microsoft is expected to generate 0.32 times more return on investment than Wingstop. However, Microsoft is 3.11 times less risky than Wingstop. It trades about -0.05 of its potential returns per unit of risk. Wingstop is currently generating about -0.05 per unit of risk. If you would invest 42,574 in Microsoft on August 27, 2024 and sell it today you would lose (874.00) from holding Microsoft or give up 2.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Wingstop
Performance |
| Timeline |
| Microsoft |
| Wingstop |
Microsoft and Wingstop Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Wingstop
The main advantage of trading using opposite Microsoft and Wingstop positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Wingstop 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 Wingstop will offset losses from the drop in Wingstop's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Rapid7 Inc |
| Wingstop vs. Papa Johns International | Wingstop vs. Chipotle Mexican Grill | Wingstop vs. The Wendys Co | Wingstop vs. Dominos Pizza |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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