Correlation Between Microsoft and Intesa Sanpaolo
Can any of the company-specific risk be diversified away by investing in both Microsoft and Intesa Sanpaolo 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 Intesa Sanpaolo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Intesa Sanpaolo SpA, you can compare the effects of market volatilities on Microsoft and Intesa Sanpaolo 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 Intesa Sanpaolo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Intesa Sanpaolo.
Diversification Opportunities for Microsoft and Intesa Sanpaolo
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Microsoft and Intesa is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Intesa Sanpaolo SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intesa Sanpaolo SpA 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 Intesa Sanpaolo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intesa Sanpaolo SpA has no effect on the direction of Microsoft i.e., Microsoft and Intesa Sanpaolo go up and down completely randomly.
Pair Corralation between Microsoft and Intesa Sanpaolo
Given the investment horizon of 90 days Microsoft is expected to under-perform the Intesa Sanpaolo. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.13 times less risky than Intesa Sanpaolo. The stock trades about -0.2 of its potential returns per unit of risk. The Intesa Sanpaolo SpA is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 362.00 in Intesa Sanpaolo SpA on February 2, 2024 and sell it today you would earn a total of 18.00 from holding Intesa Sanpaolo SpA or generate 4.97% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Microsoft vs. Intesa Sanpaolo SpA
Performance |
Timeline |
Microsoft |
Intesa Sanpaolo SpA |
Microsoft and Intesa Sanpaolo Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Intesa Sanpaolo
The main advantage of trading using opposite Microsoft and Intesa Sanpaolo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Intesa Sanpaolo 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 Intesa Sanpaolo will offset losses from the drop in Intesa Sanpaolo's long position.Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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