Correlation Between Genworth Financial and Microsoft

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

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

Diversification Opportunities for Genworth Financial and Microsoft

0.0

Correlation Coefficient

Genworth Financial  Microsoft

Pay attention - limited upside

The 3 months correlation between Genworth and Microsoft is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Genworth Financial and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Genworth Financial 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 Genworth Financial 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 Genworth Financial i.e., Genworth Financial and Microsoft go up and down completely randomly.

Pair Corralation between Genworth Financial and Microsoft

If you would invest  841,751  in Microsoft on October 7, 2024 and sell it today you would earn a total of  30,249  from holding Microsoft or generate 3.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	97.5%
Values	Daily Returns

Genworth Financial  vs.  Microsoft

Genworth Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genworth Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Genworth Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Microsoft

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Genworth Financial and Microsoft

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

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.