Correlation Between Microsoft and Newhydrogen
Can any of the company-specific risk be diversified away by investing in both Microsoft and Newhydrogen 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 Newhydrogen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Newhydrogen, you can compare the effects of market volatilities on Microsoft and Newhydrogen 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 Newhydrogen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Newhydrogen.
Diversification Opportunities for Microsoft and Newhydrogen
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Microsoft and Newhydrogen is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Newhydrogen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newhydrogen 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 Newhydrogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newhydrogen has no effect on the direction of Microsoft i.e., Microsoft and Newhydrogen go up and down completely randomly.
Pair Corralation between Microsoft and Newhydrogen
Given the investment horizon of 90 days Microsoft is expected to under-perform the Newhydrogen. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 15.82 times less risky than Newhydrogen. The stock trades about -0.14 of its potential returns per unit of risk. The Newhydrogen is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 0.31 in Newhydrogen on December 5, 2024 and sell it today you would earn a total of 1.18 from holding Newhydrogen or generate 380.65% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Microsoft vs. Newhydrogen
Performance |
Timeline |
Microsoft |
Newhydrogen |
Microsoft and Newhydrogen Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Newhydrogen
The main advantage of trading using opposite Microsoft and Newhydrogen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Newhydrogen 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 Newhydrogen will offset losses from the drop in Newhydrogen's long position.Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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