Correlation Between Microsoft and Hannover Rck

Can any of the company-specific risk be diversified away by investing in both Microsoft and Hannover Rck 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 Hannover Rck into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and Hannover Rck SE, you can compare the effects of market volatilities on Microsoft and Hannover Rck 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 Hannover Rck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Hannover Rck.

Diversification Opportunities for Microsoft and Hannover Rck

0.42

Correlation Coefficient

Microsoft  Hannover Rck

Very weak diversification

The 3 months correlation between Microsoft and Hannover is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Hannover Rck SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hannover Rck SE 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 Hannover Rck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hannover Rck SE has no effect on the direction of Microsoft i.e., Microsoft and Hannover Rck go up and down completely randomly.

Pair Corralation between Microsoft and Hannover Rck

Given the investment horizon of 90 days Microsoft is expected to generate 9.84 times less return on investment than Hannover Rck. But when comparing it to its historical volatility, Microsoft is 1.45 times less risky than Hannover Rck. It trades about 0.02 of its potential returns per unit of risk. Hannover Rck SE is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  22,770  in Hannover Rck SE on September 21, 2024 and sell it today you would earn a total of  3,535  from holding Hannover Rck SE or generate 15.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Microsoft  vs.  Hannover Rck SE

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Hannover Rck SE

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hannover Rck SE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Hannover Rck reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Hannover Rck

The main advantage of trading using opposite Microsoft and Hannover Rck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Hannover Rck 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 Hannover Rck will offset losses from the drop in Hannover Rck's long position.

The idea behind Microsoft and Hannover Rck SE pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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.