Correlation Between Microsoft and Electra Real
Can any of the company-specific risk be diversified away by investing in both Microsoft and Electra Real 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 Electra Real into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Electra Real Estate, you can compare the effects of market volatilities on Microsoft and Electra Real 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 Electra Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Electra Real.
Diversification Opportunities for Microsoft and Electra Real
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microsoft and Electra is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Electra Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electra Real Estate 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 Electra Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electra Real Estate has no effect on the direction of Microsoft i.e., Microsoft and Electra Real go up and down completely randomly.
Pair Corralation between Microsoft and Electra Real
Given the investment horizon of 90 days Microsoft is expected to generate 7.12 times less return on investment than Electra Real. But when comparing it to its historical volatility, Microsoft is 1.52 times less risky than Electra Real. It trades about 0.05 of its potential returns per unit of risk. Electra Real Estate is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 400,000 in Electra Real Estate on September 16, 2024 and sell it today you would earn a total of 95,800 from holding Electra Real Estate or generate 23.95% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 72.31% |
Values | Daily Returns |
Microsoft vs. Electra Real Estate
Performance |
Timeline |
Microsoft |
Electra Real Estate |
Microsoft and Electra Real Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Electra Real
The main advantage of trading using opposite Microsoft and Electra Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Electra Real 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 Electra Real will offset losses from the drop in Electra Real's long position.Microsoft vs. Global Blue Group | ||
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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