Correlation Between Microsoft and DI Global

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

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

Diversification Opportunities for Microsoft and DI Global

0.45

Correlation Coefficient

Microsoft  DI Global

Very weak diversification

The 3 months correlation between Microsoft and DKIGSFUT is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and DI Global Sustainable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DI Global Sustainable 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 DI Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DI Global Sustainable has no effect on the direction of Microsoft i.e., Microsoft and DI Global go up and down completely randomly.

Pair Corralation between Microsoft and DI Global

Given the investment horizon of 90 days Microsoft is expected to under-perform the DI Global. In addition to that, Microsoft is 1.74 times more volatile than DI Global Sustainable. It trades about -0.1 of its total potential returns per unit of risk. DI Global Sustainable is currently generating about -0.02 per unit of volatility. If you would invest  38,710  in DI Global Sustainable on December 26, 2024 and sell it today you would lose (560.00) from holding DI Global Sustainable or give up 1.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Microsoft  vs.  DI Global Sustainable

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

DI Global Sustainable

Risk-Adjusted Performance

Very Weak

Over the last 90 days DI Global Sustainable has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, DI Global is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Microsoft and DI Global

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

The idea behind Microsoft and DI Global Sustainable 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.