Correlation Between Microsoft and World Kinect
Can any of the company-specific risk be diversified away by investing in both Microsoft and World Kinect 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 World Kinect into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and World Kinect, you can compare the effects of market volatilities on Microsoft and World Kinect 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 World Kinect. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and World Kinect.
Diversification Opportunities for Microsoft and World Kinect
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and World is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and World Kinect in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Kinect 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 World Kinect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Kinect has no effect on the direction of Microsoft i.e., Microsoft and World Kinect go up and down completely randomly.
Pair Corralation between Microsoft and World Kinect
Given the investment horizon of 90 days Microsoft is expected to generate 0.43 times more return on investment than World Kinect. However, Microsoft is 2.35 times less risky than World Kinect. It trades about -0.06 of its potential returns per unit of risk. World Kinect is currently generating about -0.1 per unit of risk. If you would invest 42,375 in Microsoft on August 24, 2024 and sell it today you would lose (1,088) from holding Microsoft or give up 2.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Microsoft vs. World Kinect
Performance |
| Timeline |
| Microsoft |
| World Kinect |
Microsoft and World Kinect Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and World Kinect
The main advantage of trading using opposite Microsoft and World Kinect positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, World Kinect 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 World Kinect will offset losses from the drop in World Kinect's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| World Kinect vs. NioCorp Developments Ltd | World Kinect vs. Peoples Educational Holdings | World Kinect vs. Aerofoam Metals | World Kinect vs. Yuexiu Transport Infrastructure |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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