Correlation Between CarsalesCom and Microsoft
Can any of the company-specific risk be diversified away by investing in both CarsalesCom 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 CarsalesCom and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarsalesCom and Microsoft, you can compare the effects of market volatilities on CarsalesCom 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 CarsalesCom with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of CarsalesCom and Microsoft.
Diversification Opportunities for CarsalesCom and Microsoft
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between CarsalesCom and Microsoft is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and CarsalesCom 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 CarsalesCom 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 CarsalesCom i.e., CarsalesCom and Microsoft go up and down completely randomly.
Pair Corralation between CarsalesCom and Microsoft
Assuming the 90 days horizon CarsalesCom is expected to generate 1.21 times more return on investment than Microsoft. However, CarsalesCom is 1.21 times more volatile than Microsoft. It trades about 0.06 of its potential returns per unit of risk. Microsoft is currently generating about 0.03 per unit of risk. If you would invest 1,933 in CarsalesCom on October 29, 2024 and sell it today you would earn a total of 447.00 from holding CarsalesCom or generate 23.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
CarsalesCom vs. Microsoft
Performance |
| Timeline |
| CarsalesCom |
| Microsoft |
CarsalesCom and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CarsalesCom and Microsoft
The main advantage of trading using opposite CarsalesCom and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CarsalesCom 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.| CarsalesCom vs. Global Ship Lease | CarsalesCom vs. UNIVMUSIC GRPADR050 | CarsalesCom vs. SINGAPORE AIRLINES | CarsalesCom vs. Gol Intelligent Airlines |
| Microsoft vs. SIERRA METALS | Microsoft vs. TITANIUM TRANSPORTGROUP | Microsoft vs. ARDAGH METAL PACDL 0001 | Microsoft vs. FIREWEED METALS P |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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