Correlation Between Microsoft and NAMCO BANDAI

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

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

Diversification Opportunities for Microsoft and NAMCO BANDAI

-0.82

Correlation Coefficient

Microsoft  NAMCO BANDAI

Pay attention - limited upside

The 3 months correlation between Microsoft and NAMCO is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and NAMCO BANDAI HLDG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAMCO BANDAI HLDG 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 NAMCO BANDAI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NAMCO BANDAI HLDG has no effect on the direction of Microsoft i.e., Microsoft and NAMCO BANDAI go up and down completely randomly.

Pair Corralation between Microsoft and NAMCO BANDAI

Given the investment horizon of 90 days Microsoft is expected to under-perform the NAMCO BANDAI. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.91 times less risky than NAMCO BANDAI. The stock trades about -0.1 of its potential returns per unit of risk. The NAMCO BANDAI HLDG is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,260  in NAMCO BANDAI HLDG on December 22, 2024 and sell it today you would earn a total of  984.00  from holding NAMCO BANDAI HLDG or generate 43.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  NAMCO BANDAI HLDG

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.

NAMCO BANDAI HLDG

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NAMCO BANDAI HLDG are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental drivers, NAMCO BANDAI exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and NAMCO BANDAI

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

The idea behind Microsoft and NAMCO BANDAI HLDG 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.