Correlation Between Microsoft and Benchmark Bankshares
Can any of the company-specific risk be diversified away by investing in both Microsoft and Benchmark Bankshares 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 Benchmark Bankshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Benchmark Bankshares, you can compare the effects of market volatilities on Microsoft and Benchmark Bankshares 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 Benchmark Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Benchmark Bankshares.
Diversification Opportunities for Microsoft and Benchmark Bankshares
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and Benchmark is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Benchmark Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benchmark Bankshares 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 Benchmark Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benchmark Bankshares has no effect on the direction of Microsoft i.e., Microsoft and Benchmark Bankshares go up and down completely randomly.
Pair Corralation between Microsoft and Benchmark Bankshares
Given the investment horizon of 90 days Microsoft is expected to generate 0.62 times more return on investment than Benchmark Bankshares. However, Microsoft is 1.61 times less risky than Benchmark Bankshares. It trades about 0.11 of its potential returns per unit of risk. Benchmark Bankshares is currently generating about 0.03 per unit of risk. If you would invest 21,872 in Microsoft on September 26, 2024 and sell it today you would earn a total of 22,061 from holding Microsoft or generate 100.86% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 88.1% |
Values | Daily Returns |
Microsoft vs. Benchmark Bankshares
Performance |
Timeline |
Microsoft |
Benchmark Bankshares |
Microsoft and Benchmark Bankshares Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Benchmark Bankshares
The main advantage of trading using opposite Microsoft and Benchmark Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Benchmark Bankshares 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 Benchmark Bankshares will offset losses from the drop in Benchmark Bankshares' long position.Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
Benchmark Bankshares vs. Citizens Financial Corp | Benchmark Bankshares vs. Farmers Bancorp | Benchmark Bankshares vs. Alpine Banks of | Benchmark Bankshares vs. First Financial |
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.
Other Complementary Tools
Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
Bonds Directory Find actively traded corporate debentures issued by US companies | |
Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges |