Correlation Between Microsoft and Rite Aid
Can any of the company-specific risk be diversified away by investing in both Microsoft and Rite Aid 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 Rite Aid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Rite Aid, you can compare the effects of market volatilities on Microsoft and Rite Aid 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 Rite Aid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Rite Aid.
Diversification Opportunities for Microsoft and Rite Aid
Excellent diversification
The 3 months correlation between Microsoft and Rite is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Rite Aid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rite Aid 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 Rite Aid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rite Aid has no effect on the direction of Microsoft i.e., Microsoft and Rite Aid go up and down completely randomly.
Pair Corralation between Microsoft and Rite Aid
If you would invest 17.00 in Rite Aid on January 20, 2024 and sell it today you would earn a total of 0.00 from holding Rite Aid or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 4.76% |
| Values | Daily Returns |
Microsoft vs. Rite Aid
Performance |
| Timeline |
| Microsoft |
| Rite Aid |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Microsoft and Rite Aid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Rite Aid
The main advantage of trading using opposite Microsoft and Rite Aid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Rite Aid 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 Rite Aid will offset losses from the drop in Rite Aid's long position.| Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings | Microsoft vs. Cloudflare |
| Rite Aid vs. PetMed Express | Rite Aid vs. High Tide | Rite Aid vs. China Jo Jo Drugstores | Rite Aid vs. Bimi International Medical |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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