Correlation Between Microsoft and Westwood Quality
Can any of the company-specific risk be diversified away by investing in both Microsoft and Westwood Quality 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 Westwood Quality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Westwood Quality Smallcap, you can compare the effects of market volatilities on Microsoft and Westwood Quality 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 Westwood Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Westwood Quality.
Diversification Opportunities for Microsoft and Westwood Quality
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Westwood is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Westwood Quality Smallcap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood Quality Smallcap 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 Westwood Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwood Quality Smallcap has no effect on the direction of Microsoft i.e., Microsoft and Westwood Quality go up and down completely randomly.
Pair Corralation between Microsoft and Westwood Quality
Given the investment horizon of 90 days Microsoft is expected to generate 5.04 times less return on investment than Westwood Quality. But when comparing it to its historical volatility, Microsoft is 1.03 times less risky than Westwood Quality. It trades about 0.02 of its potential returns per unit of risk. Westwood Quality Smallcap is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,020 in Westwood Quality Smallcap on September 2, 2024 and sell it today you would earn a total of 324.00 from holding Westwood Quality Smallcap or generate 16.04% 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. Westwood Quality Smallcap
Performance |
| Timeline |
| Microsoft |
| Westwood Quality Smallcap |
Microsoft and Westwood Quality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Westwood Quality
The main advantage of trading using opposite Microsoft and Westwood Quality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Westwood Quality 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 Westwood Quality will offset losses from the drop in Westwood Quality's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Westwood Quality vs. Dws Government Money | Westwood Quality vs. Chestnut Street Exchange | Westwood Quality vs. Prudential Government Money | Westwood Quality vs. Aig Government Money |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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