Correlation Between Microsoft and Global Stock

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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 Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy97.62%
ValuesDaily Returns

Microsoft  vs.  Global Stock Fund

 Performance 
       Timeline  
Microsoft 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 2 (%) 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.
Global Stock 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Global Stock Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

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.
The idea behind Microsoft and Global Stock Fund 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.
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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