Correlation Between Microsoft and Keck Seng
Can any of the company-specific risk be diversified away by investing in both Microsoft and Keck Seng 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 Keck Seng into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Keck Seng Investments, you can compare the effects of market volatilities on Microsoft and Keck Seng 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 Keck Seng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Keck Seng.
Diversification Opportunities for Microsoft and Keck Seng
Poor diversification
The 3 months correlation between Microsoft and Keck is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Keck Seng Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keck Seng Investments 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 Keck Seng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keck Seng Investments has no effect on the direction of Microsoft i.e., Microsoft and Keck Seng go up and down completely randomly.
Pair Corralation between Microsoft and Keck Seng
Given the investment horizon of 90 days Microsoft is expected to generate 2.18 times less return on investment than Keck Seng. But when comparing it to its historical volatility, Microsoft is 3.04 times less risky than Keck Seng. It trades about 0.05 of its potential returns per unit of risk. Keck Seng Investments is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 23.00 in Keck Seng Investments on January 17, 2024 and sell it today you would earn a total of 8.00 from holding Keck Seng Investments or generate 34.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.75% |
| Values | Daily Returns |
Microsoft vs. Keck Seng Investments
Performance |
| Timeline |
| Microsoft |
| Keck Seng Investments |
Microsoft and Keck Seng Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Keck Seng
The main advantage of trading using opposite Microsoft and Keck Seng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Keck Seng 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 Keck Seng will offset losses from the drop in Keck Seng's long position.| Microsoft vs. Cloudflare | Microsoft vs. Okta Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Nutanix |
| Keck Seng vs. Marriott International | Keck Seng vs. Hilton Worldwide Holdings | Keck Seng vs. InterContinental Hotels Group | Keck Seng vs. Choice Hotels International |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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