Correlation Between Red Hat and Microsoft
Can any of the company-specific risk be diversified away by investing in both Red Hat and Microsoft 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 Red Hat and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Red Hat and Microsoft, 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. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Hat and Microsoft.
Diversification Opportunities for Red Hat and Microsoft
Pay attention - limited upside
The 3 months correlation between Red and Microsoft is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Red Hat and Microsoft 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 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.
Pair Corralation between Red Hat and Microsoft
If you would invest 40,754 in Microsoft on January 25, 2024 and sell it today you would earn a total of 242.00 from holding Microsoft or generate 0.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 0.0% |
| Values | Daily Returns |
Red Hat vs. Microsoft
Performance |
| Timeline |
| Red Hat |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Microsoft |
Red Hat and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Hat and Microsoft
The main advantage of trading using opposite Red Hat and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Hat position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.| Red Hat vs. Torm PLC Class | Red Hat vs. Western Copper and | Red Hat vs. Griffon | Red Hat vs. Apogee Enterprises |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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