Correlation Between Microsoft and Princeton Capital
Can any of the company-specific risk be diversified away by investing in both Microsoft and Princeton Capital 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 Princeton Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Princeton Capital, you can compare the effects of market volatilities on Microsoft and Princeton Capital 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 Princeton Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Princeton Capital.
Diversification Opportunities for Microsoft and Princeton Capital
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Microsoft and Princeton is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Princeton Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Princeton Capital 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 Princeton Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Princeton Capital has no effect on the direction of Microsoft i.e., Microsoft and Princeton Capital go up and down completely randomly.
Pair Corralation between Microsoft and Princeton Capital
Given the investment horizon of 90 days Microsoft is expected to generate 0.23 times more return on investment than Princeton Capital. However, Microsoft is 4.37 times less risky than Princeton Capital. It trades about 0.36 of its potential returns per unit of risk. Princeton Capital is currently generating about -0.21 per unit of risk. If you would invest 38,659 in Microsoft on April 24, 2025 and sell it today you would earn a total of 11,868 from holding Microsoft or generate 30.7% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 98.36% |
Values | Daily Returns |
Microsoft vs. Princeton Capital
Performance |
Timeline |
Microsoft |
Princeton Capital |
Microsoft and Princeton Capital Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Princeton Capital
The main advantage of trading using opposite Microsoft and Princeton Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Princeton Capital 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 Princeton Capital will offset losses from the drop in Princeton Capital's long position.Microsoft vs. Palantir Technologies Class | Microsoft vs. Crowdstrike Holdings | Microsoft vs. Oracle | Microsoft vs. CoreWeave, Class A |
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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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