Correlation Between Nasdaq and MICROSOFT
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By analyzing existing cross correlation between Nasdaq Inc and MICROSOFT PORATION, you can compare the effects of market volatilities on Nasdaq and MICROSOFT 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 Nasdaq with a short position of MICROSOFT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and MICROSOFT.
Diversification Opportunities for Nasdaq and MICROSOFT
Good diversification
The 3 months correlation between Nasdaq and MICROSOFT is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and MICROSOFT PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MICROSOFT PORATION and Nasdaq 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 Nasdaq Inc are associated (or correlated) with MICROSOFT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MICROSOFT PORATION has no effect on the direction of Nasdaq i.e., Nasdaq and MICROSOFT go up and down completely randomly.
Pair Corralation between Nasdaq and MICROSOFT
Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.88 times more return on investment than MICROSOFT. However, Nasdaq Inc is 1.13 times less risky than MICROSOFT. It trades about 0.39 of its potential returns per unit of risk. MICROSOFT PORATION is currently generating about 0.08 per unit of risk. If you would invest 7,589 in Nasdaq Inc on August 30, 2024 and sell it today you would earn a total of 716.00 from holding Nasdaq Inc or generate 9.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Nasdaq Inc vs. MICROSOFT PORATION
Performance |
| Timeline |
| Nasdaq Inc |
| MICROSOFT PORATION |
Nasdaq and MICROSOFT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and MICROSOFT
The main advantage of trading using opposite Nasdaq and MICROSOFT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq position performs unexpectedly, MICROSOFT 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 MICROSOFT will offset losses from the drop in MICROSOFT's long position.The idea behind Nasdaq Inc and MICROSOFT PORATION pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| MICROSOFT vs. AEP TEX INC | MICROSOFT vs. US BANK NATIONAL | MICROSOFT vs. Nasdaq Inc | MICROSOFT vs. Vertiv Holdings Co |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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