Correlation Between Quaker Chemical and Microsoft
Can any of the company-specific risk be diversified away by investing in both Quaker Chemical and Microsoft 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 Quaker Chemical and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Quaker Chemical and Microsoft, you can compare the effects of market volatilities on Quaker Chemical 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 Quaker Chemical with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quaker Chemical and Microsoft.
Diversification Opportunities for Quaker Chemical and Microsoft
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Quaker and Microsoft is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Quaker Chemical and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Quaker Chemical 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 Quaker Chemical 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 has no effect on the direction of Quaker Chemical i.e., Quaker Chemical and Microsoft go up and down completely randomly.
Pair Corralation between Quaker Chemical and Microsoft
Assuming the 90 days horizon Quaker Chemical is expected to generate 1.3 times less return on investment than Microsoft. In addition to that, Quaker Chemical is 2.49 times more volatile than Microsoft. It trades about 0.07 of its total potential returns per unit of risk. Microsoft is currently generating about 0.23 per unit of volatility. If you would invest 37,401 in Microsoft on September 1, 2024 and sell it today you would earn a total of 2,654 from holding Microsoft or generate 7.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Quaker Chemical vs. Microsoft
Performance |
| Timeline |
| Quaker Chemical |
| Microsoft |
Quaker Chemical and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Quaker Chemical and Microsoft
The main advantage of trading using opposite Quaker Chemical and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quaker Chemical 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.| Quaker Chemical vs. Transport International Holdings | Quaker Chemical vs. TSOGO SUN GAMING | Quaker Chemical vs. Air Transport Services | Quaker Chemical vs. EVS Broadcast Equipment |
| Microsoft vs. Iridium Communications | Microsoft vs. MITSUBISHI STEEL MFG | Microsoft vs. Nippon Steel | Microsoft vs. Verizon Communications |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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