Correlation Between Microsoft and Hampton Financial
Can any of the company-specific risk be diversified away by investing in both Microsoft and Hampton Financial 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 Hampton Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Hampton Financial Corp, you can compare the effects of market volatilities on Microsoft and Hampton Financial 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 Hampton Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Hampton Financial.
Diversification Opportunities for Microsoft and Hampton Financial
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Hampton is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Hampton Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hampton Financial Corp 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 Hampton Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hampton Financial Corp has no effect on the direction of Microsoft i.e., Microsoft and Hampton Financial go up and down completely randomly.
Pair Corralation between Microsoft and Hampton Financial
Given the investment horizon of 90 days Microsoft is expected to generate 2.32 times less return on investment than Hampton Financial. But when comparing it to its historical volatility, Microsoft is 1.5 times less risky than Hampton Financial. It trades about 0.02 of its potential returns per unit of risk. Hampton Financial Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 44.00 in Hampton Financial Corp on September 25, 2024 and sell it today you would earn a total of 1.00 from holding Hampton Financial Corp or generate 2.27% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Microsoft vs. Hampton Financial Corp
Performance |
Timeline |
Microsoft |
Hampton Financial Corp |
Microsoft and Hampton Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Hampton Financial
The main advantage of trading using opposite Microsoft and Hampton Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Hampton Financial 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 Hampton Financial will offset losses from the drop in Hampton Financial's long position.Microsoft vs. BlackBerry | Microsoft vs. Global Blue Group | Microsoft vs. Aurora Mobile | Microsoft vs. Marqeta |
Hampton Financial vs. Diamond Estates Wines | Hampton Financial vs. Tree Island Steel | Hampton Financial vs. NextSource Materials | Hampton Financial vs. Globex Mining Enterprises |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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