Correlation Between Microsoft and Pinetree Capital
Can any of the company-specific risk be diversified away by investing in both Microsoft and Pinetree Capital 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 Pinetree Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Pinetree Capital, you can compare the effects of market volatilities on Microsoft and Pinetree Capital 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 Pinetree Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Pinetree Capital.
Diversification Opportunities for Microsoft and Pinetree Capital
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Microsoft and Pinetree is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Pinetree Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinetree Capital 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 Pinetree Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinetree Capital has no effect on the direction of Microsoft i.e., Microsoft and Pinetree Capital go up and down completely randomly.
Pair Corralation between Microsoft and Pinetree Capital
Given the investment horizon of 90 days Microsoft is expected to under-perform the Pinetree Capital. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.69 times less risky than Pinetree Capital. The stock trades about -0.04 of its potential returns per unit of risk. The Pinetree Capital is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 705.00 in Pinetree Capital on October 7, 2024 and sell it today you would earn a total of 504.00 from holding Pinetree Capital or generate 71.49% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 98.41% |
Values | Daily Returns |
Microsoft vs. Pinetree Capital
Performance |
Timeline |
Microsoft |
Pinetree Capital |
Microsoft and Pinetree Capital Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Pinetree Capital
The main advantage of trading using opposite Microsoft and Pinetree Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Pinetree Capital 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 Pinetree Capital will offset losses from the drop in Pinetree Capital'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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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