Correlation Between Microsoft and Danske Andelskassers

Can any of the company-specific risk be diversified away by investing in both Microsoft and Danske Andelskassers 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 Andelskassers into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and Danske Andelskassers Bank, you can compare the effects of market volatilities on Microsoft and Danske Andelskassers 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 Andelskassers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Danske Andelskassers.

Diversification Opportunities for Microsoft and Danske Andelskassers

0.38

Correlation Coefficient

Microsoft  Danske Andelskassers

Weak diversification

The 3 months correlation between Microsoft and Danske is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Danske Andelskassers Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danske Andelskassers Bank 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 Andelskassers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danske Andelskassers Bank has no effect on the direction of Microsoft i.e., Microsoft and Danske Andelskassers go up and down completely randomly.

Pair Corralation between Microsoft and Danske Andelskassers

Given the investment horizon of 90 days Microsoft is expected to under-perform the Danske Andelskassers. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.02 times less risky than Danske Andelskassers. The stock trades about -0.14 of its potential returns per unit of risk. The Danske Andelskassers Bank is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  1,135  in Danske Andelskassers Bank on January 26, 2024 and sell it today you would earn a total of  115.00  from holding Danske Andelskassers Bank or generate 10.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

Microsoft  vs.  Danske Andelskassers Bank

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Danske Andelskassers Bank

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Danske Andelskassers Bank are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, Danske Andelskassers displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Danske Andelskassers

The main advantage of trading using opposite Microsoft and Danske Andelskassers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Danske Andelskassers 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 Andelskassers will offset losses from the drop in Danske Andelskassers' long position.

The idea behind Microsoft and Danske Andelskassers Bank 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.

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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 Stocks Directory module to find actively traded stocks across global markets.