Correlation Between Microsoft and Redwoods Acquisition
Can any of the company-specific risk be diversified away by investing in both Microsoft and Redwoods Acquisition 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 Redwoods Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Redwoods Acquisition Corp, you can compare the effects of market volatilities on Microsoft and Redwoods Acquisition 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 Redwoods Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Redwoods Acquisition.
Diversification Opportunities for Microsoft and Redwoods Acquisition
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Redwoods is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Redwoods Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redwoods Acquisition Corp 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 Redwoods Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redwoods Acquisition Corp has no effect on the direction of Microsoft i.e., Microsoft and Redwoods Acquisition go up and down completely randomly.
Pair Corralation between Microsoft and Redwoods Acquisition
Given the investment horizon of 90 days Microsoft is expected to generate 9.74 times less return on investment than Redwoods Acquisition. But when comparing it to its historical volatility, Microsoft is 10.16 times less risky than Redwoods Acquisition. It trades about 0.05 of its potential returns per unit of risk. Redwoods Acquisition Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 28.00 in Redwoods Acquisition Corp on March 12, 2024 and sell it today you would lose (2.00) from holding Redwoods Acquisition Corp or give up 7.14% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 80.95% |
Values | Daily Returns |
Microsoft vs. Redwoods Acquisition Corp
Performance |
Timeline |
Microsoft |
Redwoods Acquisition Corp |
Microsoft and Redwoods Acquisition Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Redwoods Acquisition
The main advantage of trading using opposite Microsoft and Redwoods Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Redwoods Acquisition 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 Redwoods Acquisition will offset losses from the drop in Redwoods Acquisition's long position.The idea behind Microsoft and Redwoods Acquisition Corp 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.Redwoods Acquisition vs. DT Cloud Acquisition | Redwoods Acquisition vs. Broad Capital Acquisition | Redwoods Acquisition vs. Churchill Capital Corp | Redwoods Acquisition vs. Twelve Seas Investment |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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