Correlation Between Microsoft and Globe Trade
Can any of the company-specific risk be diversified away by investing in both Microsoft and Globe Trade 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 Globe Trade into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Globe Trade Centre, you can compare the effects of market volatilities on Microsoft and Globe Trade 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 Globe Trade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Globe Trade.
Diversification Opportunities for Microsoft and Globe Trade
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Globe is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Globe Trade Centre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globe Trade Centre 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 Globe Trade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globe Trade Centre has no effect on the direction of Microsoft i.e., Microsoft and Globe Trade go up and down completely randomly.
Pair Corralation between Microsoft and Globe Trade
Assuming the 90 days trading horizon Microsoft is expected to under-perform the Globe Trade. In addition to that, Microsoft is 1.94 times more volatile than Globe Trade Centre. It trades about -0.15 of its total potential returns per unit of risk. Globe Trade Centre is currently generating about 0.15 per unit of volatility. If you would invest 91.00 in Globe Trade Centre on December 30, 2024 and sell it today you would earn a total of 7.00 from holding Globe Trade Centre or generate 7.69% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Microsoft vs. Globe Trade Centre
Performance |
Timeline |
Microsoft |
Globe Trade Centre |
Microsoft and Globe Trade Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Globe Trade
The main advantage of trading using opposite Microsoft and Globe Trade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Globe Trade 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 Globe Trade will offset losses from the drop in Globe Trade's long position.Microsoft vs. CHINA SOUTHN AIR H | Microsoft vs. QLEANAIR AB SK 50 | Microsoft vs. Westinghouse Air Brake | Microsoft vs. AEGEAN AIRLINES |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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