Pair Correlation Between Red Hat and Microsoft

This module allows you to analyze existing cross correlation between Red Hat Inc and Microsoft Corporation. You can compare the effects of market volatilities on Red Hat and Microsoft 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 Red Hat with a short position of Microsoft. See also your portfolio center. Please also check ongoing floating volatility patterns of Red Hat and Microsoft.
Investment Horizon     30 Days    Login   to change
Symbolsvs
 Red Hat Inc  vs   Microsoft Corp.
 Performance (%) 
      Timeline 

Pair Volatility

Considering 30-days investment horizon, Red Hat is expected to generate 1.56 times less return on investment than Microsoft. But when comparing it to its historical volatility, Red Hat Inc is 1.99 times less risky than Microsoft. It trades about 0.22 of its potential returns per unit of risk. Microsoft Corporation is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  7,791  in Microsoft Corporation on October 19, 2017 and sell it today you would earn a total of  449  from holding Microsoft Corporation or generate 5.76% return on investment over 30 days.

Correlation Coefficient

Pair Corralation between Red Hat and Microsoft
0.33

Parameters

Time Period1 Month [change]
DirectionPositive 
StrengthVery Weak
Accuracy95.65%
ValuesDaily Returns

Diversification

Weak diversification

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

Comparative Volatility

 Predicted Return Density 
      Returns 

Red Hat Inc

  
15 

Risk-Adjusted Performance

Compared to the overall equity markets, risk-adjusted returns on investments in Red Hat Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 30 days.

Microsoft

  
11 

Risk-Adjusted Performance

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft Corporation are ranked lower than 11 (%) of all global equities and portfolios over the last 30 days.