Correlation Between Microsoft and DigitalTown
Can any of the company-specific risk be diversified away by investing in both Microsoft and DigitalTown 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 DigitalTown into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and DigitalTown, you can compare the effects of market volatilities on Microsoft and DigitalTown 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 DigitalTown. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and DigitalTown.
Diversification Opportunities for Microsoft and DigitalTown
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Microsoft and DigitalTown is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and DigitalTown in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DigitalTown 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 DigitalTown. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DigitalTown has no effect on the direction of Microsoft i.e., Microsoft and DigitalTown go up and down completely randomly.
Pair Corralation between Microsoft and DigitalTown
Given the investment horizon of 90 days Microsoft is expected to generate 2.05 times less return on investment than DigitalTown. But when comparing it to its historical volatility, Microsoft is 7.04 times less risky than DigitalTown. It trades about 0.05 of its potential returns per unit of risk. DigitalTown is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 0.03 in DigitalTown on January 20, 2024 and sell it today you would lose (0.03) from holding DigitalTown or give up 100.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. DigitalTown
Performance |
| Timeline |
| Microsoft |
| DigitalTown |
Microsoft and DigitalTown Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and DigitalTown
The main advantage of trading using opposite Microsoft and DigitalTown positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, DigitalTown 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 DigitalTown will offset losses from the drop in DigitalTown's long position.| Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings | Microsoft vs. Cloudflare |
| DigitalTown vs. Tautachrome | DigitalTown vs. Nukkleus | DigitalTown vs. AB International Group | DigitalTown vs. APT Systems |
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 Valuation module to check real value of public entities based on technical and fundamental data.
Other Complementary Tools
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device |