Correlation Between ENTERGY Dusseldorf and Microsoft

Can any of the company-specific risk be diversified away by investing in both ENTERGY Dusseldorf 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 ENTERGY Dusseldorf and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ENTERGY Dusseldorf and Microsoft, you can compare the effects of market volatilities on ENTERGY Dusseldorf 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 ENTERGY Dusseldorf with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of ENTERGY Dusseldorf and Microsoft.

Diversification Opportunities for ENTERGY Dusseldorf and Microsoft

0.71

Correlation Coefficient

ENTERGY Dusseldorf  Microsoft

Poor diversification

The 3 months correlation between ENTERGY and Microsoft is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding ENTERGY Dusseldorf and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and ENTERGY Dusseldorf 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 ENTERGY Dusseldorf 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 ENTERGY Dusseldorf i.e., ENTERGY Dusseldorf and Microsoft go up and down completely randomly.

Pair Corralation between ENTERGY Dusseldorf and Microsoft

Assuming the 90 days trading horizon ENTERGY Dusseldorf is expected to generate 1.06 times more return on investment than Microsoft. However, ENTERGY Dusseldorf is 1.06 times more volatile than Microsoft. It trades about 0.08 of its potential returns per unit of risk. Microsoft is currently generating about 0.09 per unit of risk. If you would invest  4,341  in ENTERGY Dusseldorf on October 5, 2024 and sell it today you would earn a total of  2,909  from holding ENTERGY Dusseldorf or generate 67.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

ENTERGY Dusseldorf  vs.  Microsoft

ENTERGY Dusseldorf

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days ENTERGY Dusseldorf has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, ENTERGY Dusseldorf unveiled solid returns over the last few months and may actually be approaching a breakup point.

Microsoft

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively fragile technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ENTERGY Dusseldorf and Microsoft

The main advantage of trading using opposite ENTERGY Dusseldorf and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ENTERGY Dusseldorf 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 ENTERGY Dusseldorf and Microsoft 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.

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.