Correlation Between Vertiv Holdings and Microsoft
Can any of the company-specific risk be diversified away by investing in both Vertiv Holdings 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 Vertiv Holdings and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vertiv Holdings Co and Microsoft, you can compare the effects of market volatilities on Vertiv Holdings 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 Vertiv Holdings with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vertiv Holdings and Microsoft.
Diversification Opportunities for Vertiv Holdings and Microsoft
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Vertiv and Microsoft is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Vertiv Holdings Co and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Vertiv Holdings 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 Vertiv Holdings Co 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 Vertiv Holdings i.e., Vertiv Holdings and Microsoft go up and down completely randomly.
Pair Corralation between Vertiv Holdings and Microsoft
Considering the 90-day investment horizon Vertiv Holdings Co is expected to generate 2.77 times more return on investment than Microsoft. However, Vertiv Holdings is 2.77 times more volatile than Microsoft. It trades about 0.14 of its potential returns per unit of risk. Microsoft is currently generating about 0.06 per unit of risk. If you would invest 3,969 in Vertiv Holdings Co on September 1, 2024 and sell it today you would earn a total of 8,791 from holding Vertiv Holdings Co or generate 221.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vertiv Holdings Co vs. Microsoft
Performance |
| Timeline |
| Vertiv Holdings |
| Microsoft |
Vertiv Holdings and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vertiv Holdings and Microsoft
The main advantage of trading using opposite Vertiv Holdings and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vertiv Holdings 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.| Vertiv Holdings vs. nVent Electric PLC | Vertiv Holdings vs. Hubbell | Vertiv Holdings vs. Advanced Energy Industries | Vertiv Holdings vs. Energizer Holdings |
| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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