Correlation Between Microsoft and Helen Of

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

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

Diversification Opportunities for Microsoft and Helen Of

0.9

Correlation Coefficient

Microsoft  Helen Of

Almost no diversification

The 3 months correlation between Microsoft and Helen is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Helen of Troy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Helen of Troy 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 Helen Of. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Helen of Troy has no effect on the direction of Microsoft i.e., Microsoft and Helen Of go up and down completely randomly.

Pair Corralation between Microsoft and Helen Of

Given the investment horizon of 90 days Microsoft is expected to generate 0.68 times more return on investment than Helen Of. However, Microsoft is 1.47 times less risky than Helen Of. It trades about -0.08 of its potential returns per unit of risk. Helen of Troy is currently generating about -0.06 per unit of risk. If you would invest  42,398  in Microsoft on December 29, 2024 and sell it today you would lose (3,340) from holding Microsoft or give up 7.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  Helen of Troy

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Helen of Troy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Helen of Troy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Microsoft and Helen Of

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

The idea behind Microsoft and Helen of Troy 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..