Correlation Between Microsoft and INFORMATION SVC
Can any of the company-specific risk be diversified away by investing in both Microsoft and INFORMATION SVC 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 INFORMATION SVC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and INFORMATION SVC GRP, you can compare the effects of market volatilities on Microsoft and INFORMATION SVC 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 INFORMATION SVC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and INFORMATION SVC.
Diversification Opportunities for Microsoft and INFORMATION SVC
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Microsoft and INFORMATION is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and INFORMATION SVC GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INFORMATION SVC GRP 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 INFORMATION SVC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INFORMATION SVC GRP has no effect on the direction of Microsoft i.e., Microsoft and INFORMATION SVC go up and down completely randomly.
Pair Corralation between Microsoft and INFORMATION SVC
Assuming the 90 days trading horizon Microsoft is expected to generate 0.64 times more return on investment than INFORMATION SVC. However, Microsoft is 1.55 times less risky than INFORMATION SVC. It trades about 0.11 of its potential returns per unit of risk. INFORMATION SVC GRP is currently generating about -0.01 per unit of risk. If you would invest 20,752 in Microsoft on September 26, 2024 and sell it today you would earn a total of 21,213 from holding Microsoft or generate 102.22% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Microsoft vs. INFORMATION SVC GRP
Performance |
Timeline |
Microsoft |
INFORMATION SVC GRP |
Microsoft and INFORMATION SVC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and INFORMATION SVC
The main advantage of trading using opposite Microsoft and INFORMATION SVC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, INFORMATION SVC 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 INFORMATION SVC will offset losses from the drop in INFORMATION SVC's long position.The idea behind Microsoft and INFORMATION SVC GRP 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.INFORMATION SVC vs. Apple Inc | INFORMATION SVC vs. Apple Inc | INFORMATION SVC vs. Microsoft | INFORMATION SVC 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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