Correlation Between Microsoft and Migdal Insurance
Can any of the company-specific risk be diversified away by investing in both Microsoft and Migdal Insurance 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 Migdal Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Migdal Insurance, you can compare the effects of market volatilities on Microsoft and Migdal Insurance 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 Migdal Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Migdal Insurance.
Diversification Opportunities for Microsoft and Migdal Insurance
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and Migdal is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Migdal Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Migdal Insurance 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 Migdal Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Migdal Insurance has no effect on the direction of Microsoft i.e., Microsoft and Migdal Insurance go up and down completely randomly.
Pair Corralation between Microsoft and Migdal Insurance
Given the investment horizon of 90 days Microsoft is expected to generate 4.93 times less return on investment than Migdal Insurance. But when comparing it to its historical volatility, Microsoft is 1.76 times less risky than Migdal Insurance. It trades about 0.11 of its potential returns per unit of risk. Migdal Insurance is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 45,290 in Migdal Insurance on December 29, 2023 and sell it today you would earn a total of 5,720 from holding Migdal Insurance or generate 12.63% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 73.91% |
Values | Daily Returns |
Microsoft vs. Migdal Insurance
Performance |
Timeline |
Microsoft |
Migdal Insurance |
Microsoft and Migdal Insurance Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Migdal Insurance
The main advantage of trading using opposite Microsoft and Migdal Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Migdal Insurance 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 Migdal Insurance will offset losses from the drop in Migdal Insurance's long position.Microsoft vs. Global Blue Group | Microsoft vs. Aurora Mobile | Microsoft vs. Marqeta | Microsoft vs. Nextnav Acquisition Corp |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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