Correlation Between Microsoft and CNVISION MEDIA
Can any of the company-specific risk be diversified away by investing in both Microsoft and CNVISION MEDIA 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 Microsoft and CNVISION MEDIA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and CNVISION MEDIA, you can compare the effects of market volatilities on Microsoft and CNVISION MEDIA 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 Microsoft with a short position of CNVISION MEDIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and CNVISION MEDIA.
Diversification Opportunities for Microsoft and CNVISION MEDIA
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and CNVISION is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and CNVISION MEDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNVISION MEDIA and Microsoft 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 Microsoft are associated (or correlated) with CNVISION MEDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNVISION MEDIA has no effect on the direction of Microsoft i.e., Microsoft and CNVISION MEDIA go up and down completely randomly.
Pair Corralation between Microsoft and CNVISION MEDIA
Assuming the 90 days trading horizon Microsoft is expected to generate 0.48 times more return on investment than CNVISION MEDIA. However, Microsoft is 2.1 times less risky than CNVISION MEDIA. It trades about 0.1 of its potential returns per unit of risk. CNVISION MEDIA is currently generating about 0.0 per unit of risk. If you would invest 20,891 in Microsoft on September 26, 2024 and sell it today you would earn a total of 20,809 from holding Microsoft or generate 99.61% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Microsoft vs. CNVISION MEDIA
Performance |
Timeline |
Microsoft |
CNVISION MEDIA |
Microsoft and CNVISION MEDIA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and CNVISION MEDIA
The main advantage of trading using opposite Microsoft and CNVISION MEDIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, CNVISION MEDIA 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 CNVISION MEDIA will offset losses from the drop in CNVISION MEDIA's long position.The idea behind Microsoft and CNVISION MEDIA 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.CNVISION MEDIA vs. Apple Inc | CNVISION MEDIA vs. Apple Inc | CNVISION MEDIA vs. Microsoft | CNVISION MEDIA vs. Microsoft |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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