Correlation Between G2D Investments and Microsoft

Can any of the company-specific risk be diversified away by investing in both G2D Investments 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 G2D Investments and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between G2D Investments and Microsoft, you can compare the effects of market volatilities on G2D Investments 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 G2D Investments with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of G2D Investments and Microsoft.

Diversification Opportunities for G2D Investments and Microsoft

-0.61

Correlation Coefficient

G2D Investments  Microsoft

Excellent diversification

The 3 months correlation between G2D and Microsoft is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding G2D Investments and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and G2D Investments 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 G2D Investments 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 G2D Investments i.e., G2D Investments and Microsoft go up and down completely randomly.

Pair Corralation between G2D Investments and Microsoft

Assuming the 90 days trading horizon G2D Investments is expected to generate 20.58 times less return on investment than Microsoft. In addition to that, G2D Investments is 1.83 times more volatile than Microsoft. It trades about 0.0 of its total potential returns per unit of risk. Microsoft is currently generating about 0.1 per unit of volatility. If you would invest  5,232  in Microsoft on October 23, 2024 and sell it today you would earn a total of  5,707  from holding Microsoft or generate 109.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.79%
Values	Daily Returns

G2D Investments  vs.  Microsoft

G2D Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days G2D Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Microsoft

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with G2D Investments and Microsoft

The main advantage of trading using opposite G2D Investments and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G2D Investments 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.

The idea behind G2D Investments and Microsoft 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.

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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.