Correlation Between Microsoft and Nationwide Small
Can any of the company-specific risk be diversified away by investing in both Microsoft and Nationwide Small 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 Nationwide Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Nationwide Small Cap, you can compare the effects of market volatilities on Microsoft and Nationwide Small 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 Nationwide Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Nationwide Small.
Diversification Opportunities for Microsoft and Nationwide Small
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Nationwide is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Nationwide Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Small Cap 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 Nationwide Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Small Cap has no effect on the direction of Microsoft i.e., Microsoft and Nationwide Small go up and down completely randomly.
Pair Corralation between Microsoft and Nationwide Small
Given the investment horizon of 90 days Microsoft is expected to generate 1.77 times less return on investment than Nationwide Small. In addition to that, Microsoft is 1.02 times more volatile than Nationwide Small Cap. It trades about 0.05 of its total potential returns per unit of risk. Nationwide Small Cap is currently generating about 0.1 per unit of volatility. If you would invest 1,245 in Nationwide Small Cap on September 15, 2024 and sell it today you would earn a total of 93.00 from holding Nationwide Small Cap or generate 7.47% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Microsoft vs. Nationwide Small Cap
Performance |
Timeline |
Microsoft |
Nationwide Small Cap |
Microsoft and Nationwide Small Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Nationwide Small
The main advantage of trading using opposite Microsoft and Nationwide Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Nationwide Small 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 Nationwide Small will offset losses from the drop in Nationwide Small's long position.Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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