Correlation Between Microsoft and Golub Capital

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

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

Diversification Opportunities for Microsoft and Golub Capital

0.16

Correlation Coefficient

Microsoft  Golub Capital

Average diversification

The 3 months correlation between Microsoft and Golub is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Golub Capital BDC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golub Capital BDC 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 Golub Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golub Capital BDC has no effect on the direction of Microsoft i.e., Microsoft and Golub Capital go up and down completely randomly.

Pair Corralation between Microsoft and Golub Capital

Given the investment horizon of 90 days Microsoft is expected to generate 1.37 times less return on investment than Golub Capital. In addition to that, Microsoft is 1.56 times more volatile than Golub Capital BDC. It trades about 0.05 of its total potential returns per unit of risk. Golub Capital BDC is currently generating about 0.11 per unit of volatility. If you would invest  1,485  in Golub Capital BDC on September 2, 2024 and sell it today you would earn a total of  82.00  from holding Golub Capital BDC or generate 5.52% return on investment over 90 days.

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

Microsoft  vs.  Golub Capital BDC

Microsoft

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 3 (%) 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.

Golub Capital BDC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Golub Capital BDC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Golub Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Microsoft and Golub Capital

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

The idea behind Microsoft and Golub Capital BDC 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.