Correlation Between Microsoft and Glanbia Plc
Can any of the company-specific risk be diversified away by investing in both Microsoft and Glanbia Plc 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 Glanbia Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Glanbia plc, you can compare the effects of market volatilities on Microsoft and Glanbia Plc 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 Glanbia Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Glanbia Plc.
Diversification Opportunities for Microsoft and Glanbia Plc
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Glanbia is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Glanbia plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glanbia plc 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 Glanbia Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glanbia plc has no effect on the direction of Microsoft i.e., Microsoft and Glanbia Plc go up and down completely randomly.
Pair Corralation between Microsoft and Glanbia Plc
Given the investment horizon of 90 days Microsoft is expected to generate 0.72 times more return on investment than Glanbia Plc. However, Microsoft is 1.4 times less risky than Glanbia Plc. It trades about 0.06 of its potential returns per unit of risk. Glanbia plc is currently generating about -0.17 per unit of risk. If you would invest 43,440 in Microsoft on September 20, 2024 and sell it today you would earn a total of 2,006 from holding Microsoft or generate 4.62% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Microsoft vs. Glanbia plc
Performance |
Timeline |
Microsoft |
Glanbia plc |
Microsoft and Glanbia Plc Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Glanbia Plc
The main advantage of trading using opposite Microsoft and Glanbia Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Glanbia Plc 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 Glanbia Plc will offset losses from the drop in Glanbia Plc's long position.Microsoft vs. Global Blue Group | Microsoft vs. Aurora Mobile | Microsoft vs. Marqeta | Microsoft vs. Nextnav Acquisition Corp |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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