Correlation Between Microsoft and Red Hat
Can any of the company-specific risk be diversified away by investing in both Microsoft and Red Hat 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 Red Hat into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Red Hat, you can compare the effects of market volatilities on Microsoft and Red Hat 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 Red Hat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Red Hat.
Diversification Opportunities for Microsoft and Red Hat
Pay attention - limited upside
The 3 months correlation between Microsoft and Red is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Red Hat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Hat 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 Red Hat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Hat has no effect on the direction of Microsoft i.e., Microsoft and Red Hat go up and down completely randomly.
Pair Corralation between Microsoft and Red Hat
If you would invest (100.00) in Red Hat on January 26, 2024 and sell it today you would earn a total of 100.00 from holding Red Hat or generate -100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 0.0% |
| Values | Daily Returns |
Microsoft vs. Red Hat
Performance |
| Timeline |
| Microsoft |
| Red Hat |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Microsoft and Red Hat Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Red Hat
The main advantage of trading using opposite Microsoft and Red Hat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Red Hat 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 Red Hat will offset losses from the drop in Red Hat's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Red Hat vs. Torm PLC Class | Red Hat vs. Western Copper and | Red Hat vs. Griffon | Red Hat vs. Apogee 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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