Correlation Between Microsoft and Beyond Meat
Can any of the company-specific risk be diversified away by investing in both Microsoft and Beyond Meat 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 Beyond Meat into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Beyond Meat, you can compare the effects of market volatilities on Microsoft and Beyond Meat 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 Beyond Meat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Beyond Meat.
Diversification Opportunities for Microsoft and Beyond Meat
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Beyond is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Beyond Meat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beyond Meat 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 Beyond Meat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beyond Meat has no effect on the direction of Microsoft i.e., Microsoft and Beyond Meat go up and down completely randomly.
Pair Corralation between Microsoft and Beyond Meat
Assuming the 90 days trading horizon Microsoft is expected to generate 0.38 times more return on investment than Beyond Meat. However, Microsoft is 2.6 times less risky than Beyond Meat. It trades about -0.25 of its potential returns per unit of risk. Beyond Meat is currently generating about -0.1 per unit of risk. If you would invest 10,636 in Microsoft on November 28, 2024 and sell it today you would lose (887.00) from holding Microsoft or give up 8.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Beyond Meat
Performance |
| Timeline |
| Microsoft |
| Beyond Meat |
Microsoft and Beyond Meat Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Beyond Meat
The main advantage of trading using opposite Microsoft and Beyond Meat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Beyond Meat 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 Beyond Meat will offset losses from the drop in Beyond Meat's long position.| Microsoft vs. LPL Financial Holdings | Microsoft vs. Credit Acceptance | Microsoft vs. Molson Coors Beverage | Microsoft vs. Ameriprise Financial |
| Beyond Meat vs. UnitedHealth Group Incorporated | Beyond Meat vs. Hospital Mater Dei | Beyond Meat vs. Zoom Video Communications | Beyond Meat vs. Clover Health Investments, |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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