Correlation Between Microsoft and Golden Long
Can any of the company-specific risk be diversified away by investing in both Microsoft and Golden Long 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 Golden Long into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Golden Long Teng, you can compare the effects of market volatilities on Microsoft and Golden Long 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 Golden Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Golden Long.
Diversification Opportunities for Microsoft and Golden Long
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Golden is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Golden Long Teng in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Long Teng 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 Golden Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Long Teng has no effect on the direction of Microsoft i.e., Microsoft and Golden Long go up and down completely randomly.
Pair Corralation between Microsoft and Golden Long
Given the investment horizon of 90 days Microsoft is expected to generate 1.6 times less return on investment than Golden Long. But when comparing it to its historical volatility, Microsoft is 1.74 times less risky than Golden Long. It trades about 0.09 of its potential returns per unit of risk. Golden Long Teng is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,180 in Golden Long Teng on October 3, 2024 and sell it today you would earn a total of 1,595 from holding Golden Long Teng or generate 135.17% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 96.97% |
Values | Daily Returns |
Microsoft vs. Golden Long Teng
Performance |
Timeline |
Microsoft |
Golden Long Teng |
Microsoft and Golden Long Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Golden Long
The main advantage of trading using opposite Microsoft and Golden Long positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Golden Long 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 Golden Long will offset losses from the drop in Golden Long's long position.Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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