Correlation Between Microsoft Corp and GOLDMAN SACHS

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

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

Diversification Opportunities for Microsoft Corp and GOLDMAN SACHS

0.13

Correlation Coefficient

Microsoft Corp  GOLDMAN SACHS

Average diversification

The 3 months correlation between Microsoft and GOLDMAN is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp CDR and GOLDMAN SACHS CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOLDMAN SACHS CDR and Microsoft Corp 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 Corp CDR are associated (or correlated) with GOLDMAN SACHS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOLDMAN SACHS CDR has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and GOLDMAN SACHS go up and down completely randomly.

Pair Corralation between Microsoft Corp and GOLDMAN SACHS

Assuming the 90 days trading horizon Microsoft Corp CDR is expected to generate 0.89 times more return on investment than GOLDMAN SACHS. However, Microsoft Corp CDR is 1.12 times less risky than GOLDMAN SACHS. It trades about 0.1 of its potential returns per unit of risk. GOLDMAN SACHS CDR is currently generating about 0.08 per unit of risk. If you would invest  1,732  in Microsoft Corp CDR on September 14, 2024 and sell it today you would earn a total of  1,553  from holding Microsoft Corp CDR or generate 89.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Microsoft Corp CDR  vs.  GOLDMAN SACHS CDR

Microsoft Corp CDR

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft Corp CDR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Microsoft Corp is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

GOLDMAN SACHS CDR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GOLDMAN SACHS CDR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, GOLDMAN SACHS displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft Corp and GOLDMAN SACHS

The main advantage of trading using opposite Microsoft Corp and GOLDMAN SACHS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft Corp position performs unexpectedly, GOLDMAN SACHS 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 GOLDMAN SACHS will offset losses from the drop in GOLDMAN SACHS's long position.

The idea behind Microsoft Corp CDR and GOLDMAN SACHS CDR 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.