Correlation Between Microsoft and Danske Invest

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Can any of the company-specific risk be diversified away by investing in both Microsoft and Danske Invest 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 Danske Invest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Danske Invest Mix, you can compare the effects of market volatilities on Microsoft and Danske Invest 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 Danske Invest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Danske Invest.

Diversification Opportunities for Microsoft and Danske Invest

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Microsoft and Danske is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Danske Invest Mix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danske Invest Mix 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 Danske Invest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danske Invest Mix has no effect on the direction of Microsoft i.e., Microsoft and Danske Invest go up and down completely randomly.

Pair Corralation between Microsoft and Danske Invest

Given the investment horizon of 90 days Microsoft is expected to generate 4.18 times more return on investment than Danske Invest. However, Microsoft is 4.18 times more volatile than Danske Invest Mix. It trades about 0.12 of its potential returns per unit of risk. Danske Invest Mix is currently generating about 0.13 per unit of risk. If you would invest  28,489  in Microsoft on December 29, 2023 and sell it today you would earn a total of  13,654  from holding Microsoft or generate 47.93% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy99.6%
ValuesDaily Returns

Microsoft  vs.  Danske Invest Mix

 Performance 
       Timeline  
Microsoft 

Risk-Adjusted Performance

12 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Danske Invest Mix 

Risk-Adjusted Performance

20 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Danske Invest Mix are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Danske Invest is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Microsoft and Danske Invest Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Microsoft and Danske Invest

The main advantage of trading using opposite Microsoft and Danske Invest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Danske Invest 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 Danske Invest will offset losses from the drop in Danske Invest's long position.
The idea behind Microsoft and Danske Invest Mix 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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