Correlation Between Microsoft and Evli Pankki

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

By analyzing existing cross correlation between Microsoft and Evli Pankki Oyj, you can compare the effects of market volatilities on Microsoft and Evli Pankki 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 Evli Pankki. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Evli Pankki.

Diversification Opportunities for Microsoft and Evli Pankki

-0.45

Correlation Coefficient

Microsoft  Evli Pankki

Very good diversification

The 3 months correlation between Microsoft and Evli is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Evli Pankki Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evli Pankki Oyj 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 Evli Pankki. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evli Pankki Oyj has no effect on the direction of Microsoft i.e., Microsoft and Evli Pankki go up and down completely randomly.

Pair Corralation between Microsoft and Evli Pankki

Given the investment horizon of 90 days Microsoft is expected to under-perform the Evli Pankki. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.68 times less risky than Evli Pankki. The stock trades about -0.07 of its potential returns per unit of risk. The Evli Pankki Oyj is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,760  in Evli Pankki Oyj on October 23, 2024 and sell it today you would earn a total of  60.00  from holding Evli Pankki Oyj or generate 3.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	83.33%
Values	Daily Returns

Microsoft  vs.  Evli Pankki Oyj

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Evli Pankki Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evli Pankki Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Evli Pankki is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Microsoft and Evli Pankki

The main advantage of trading using opposite Microsoft and Evli Pankki positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Evli Pankki 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 Evli Pankki will offset losses from the drop in Evli Pankki's long position.

The idea behind Microsoft and Evli Pankki Oyj 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.