Correlation Between Microsoft and DSV Panalpina

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

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

Diversification Opportunities for Microsoft and DSV Panalpina

-0.56

Correlation Coefficient

Microsoft  DSV Panalpina

Excellent diversification

The 3 months correlation between Microsoft and DSV is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and DSV Panalpina AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DSV Panalpina AS 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 DSV Panalpina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DSV Panalpina AS has no effect on the direction of Microsoft i.e., Microsoft and DSV Panalpina go up and down completely randomly.

Pair Corralation between Microsoft and DSV Panalpina

Given the investment horizon of 90 days Microsoft is expected to under-perform the DSV Panalpina. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.25 times less risky than DSV Panalpina. The stock trades about -0.24 of its potential returns per unit of risk. The DSV Panalpina AS is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  108,700  in DSV Panalpina AS on January 20, 2024 and sell it today you would lose (1,300) from holding DSV Panalpina AS or give up 1.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Microsoft  vs.  DSV Panalpina AS

Microsoft

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 2 (%) 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.

DSV Panalpina AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DSV Panalpina AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Microsoft and DSV Panalpina

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

The idea behind Microsoft and DSV Panalpina AS 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.