Correlation Between Microsoft and Allan Gray

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

By analyzing existing cross correlation between Microsoft and Allan Gray Tax free, you can compare the effects of market volatilities on Microsoft and Allan Gray 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 Allan Gray. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Allan Gray.

Diversification Opportunities for Microsoft and Allan Gray

0.22

Correlation Coefficient

Microsoft  Allan Gray

Modest diversification

The 3 months correlation between Microsoft and Allan is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Allan Gray Tax free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allan Gray Tax 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 Allan Gray. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allan Gray Tax has no effect on the direction of Microsoft i.e., Microsoft and Allan Gray go up and down completely randomly.

Pair Corralation between Microsoft and Allan Gray

Given the investment horizon of 90 days Microsoft is expected to generate 3.62 times more return on investment than Allan Gray. However, Microsoft is 3.62 times more volatile than Allan Gray Tax free. It trades about 0.06 of its potential returns per unit of risk. Allan Gray Tax free is currently generating about 0.09 per unit of risk. If you would invest  43,048  in Microsoft on September 14, 2024 and sell it today you would earn a total of  1,908  from holding Microsoft or generate 4.43% return on investment over 90 days.

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

Microsoft  vs.  Allan Gray Tax free

Microsoft

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Allan Gray Tax

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Allan Gray Tax free has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong technical and fundamental indicators, Allan Gray is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Allan Gray

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

The idea behind Microsoft and Allan Gray Tax free 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.