Correlation Between Microsoft and Dentsu
Can any of the company-specific risk be diversified away by investing in both Microsoft and Dentsu 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 Dentsu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Dentsu Group, you can compare the effects of market volatilities on Microsoft and Dentsu 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 Dentsu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Dentsu.
Diversification Opportunities for Microsoft and Dentsu
Very good diversification
The 3 months correlation between Microsoft and Dentsu is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Dentsu Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dentsu Group 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 Dentsu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dentsu Group has no effect on the direction of Microsoft i.e., Microsoft and Dentsu go up and down completely randomly.
Pair Corralation between Microsoft and Dentsu
Given the investment horizon of 90 days Microsoft is expected to generate 0.71 times more return on investment than Dentsu. However, Microsoft is 1.41 times less risky than Dentsu. It trades about 0.1 of its potential returns per unit of risk. Dentsu Group is currently generating about -0.01 per unit of risk. If you would invest 22,540 in Microsoft on September 25, 2024 and sell it today you would earn a total of 21,393 from holding Microsoft or generate 94.91% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 98.22% |
Values | Daily Returns |
Microsoft vs. Dentsu Group
Performance |
Timeline |
Microsoft |
Dentsu Group |
Microsoft and Dentsu Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Dentsu
The main advantage of trading using opposite Microsoft and Dentsu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Dentsu 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 Dentsu will offset losses from the drop in Dentsu's long position.Microsoft vs. BlackBerry | Microsoft vs. Global Blue Group | Microsoft vs. Aurora Mobile | Microsoft vs. Marqeta |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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