Correlation Between Microsoft and Yamaha
Can any of the company-specific risk be diversified away by investing in both Microsoft and Yamaha 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 Yamaha into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Yamaha, you can compare the effects of market volatilities on Microsoft and Yamaha 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 Yamaha. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Yamaha.
Diversification Opportunities for Microsoft and Yamaha
Good diversification
The 3 months correlation between Microsoft and Yamaha is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Yamaha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yamaha 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 Yamaha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yamaha has no effect on the direction of Microsoft i.e., Microsoft and Yamaha go up and down completely randomly.
Pair Corralation between Microsoft and Yamaha
Given the investment horizon of 90 days Microsoft is expected to generate 0.47 times more return on investment than Yamaha. However, Microsoft is 2.12 times less risky than Yamaha. It trades about 0.05 of its potential returns per unit of risk. Yamaha is currently generating about -0.05 per unit of risk. If you would invest 43,048 in Microsoft on September 14, 2024 and sell it today you would earn a total of 1,679 from holding Microsoft or generate 3.9% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Microsoft vs. Yamaha
Performance |
Timeline |
Microsoft |
Yamaha |
Microsoft and Yamaha Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Yamaha
The main advantage of trading using opposite Microsoft and Yamaha positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Yamaha 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 Yamaha will offset losses from the drop in Yamaha's long position.Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
Yamaha vs. Superior Plus Corp | Yamaha vs. SIVERS SEMICONDUCTORS AB | Yamaha vs. Norsk Hydro ASA | Yamaha vs. Reliance Steel Aluminum |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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