Correlation Between Microsoft and Global Stock
Can any of the company-specific risk be diversified away by investing in both Microsoft and Global Stock 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 Global Stock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Global Stock Fund, you can compare the effects of market volatilities on Microsoft and Global Stock 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 Global Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Global Stock.
Diversification Opportunities for Microsoft and Global Stock
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Global is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Global Stock Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Stock 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 Global Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Stock has no effect on the direction of Microsoft i.e., Microsoft and Global Stock go up and down completely randomly.
Pair Corralation between Microsoft and Global Stock
Given the investment horizon of 90 days Microsoft is expected to generate 0.97 times more return on investment than Global Stock. However, Microsoft is 1.03 times less risky than Global Stock. It trades about 0.06 of its potential returns per unit of risk. Global Stock Fund is currently generating about -0.12 per unit of risk. If you would invest 42,574 in Microsoft on September 26, 2024 and sell it today you would earn a total of 1,359 from holding Microsoft or generate 3.19% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 97.62% |
Values | Daily Returns |
Microsoft vs. Global Stock Fund
Performance |
Timeline |
Microsoft |
Global Stock |
Microsoft and Global Stock Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Global Stock
The main advantage of trading using opposite Microsoft and Global Stock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Global Stock 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 Global Stock will offset losses from the drop in Global Stock'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 CEOs Directory module to screen CEOs from public companies around the world.
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