Correlation Between Microsoft and Galenfeha

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

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

Diversification Opportunities for Microsoft and Galenfeha

0.11

Correlation Coefficient

Microsoft  Galenfeha

Average diversification

The 3 months correlation between Microsoft and Galenfeha is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Galenfeha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galenfeha 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 Galenfeha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galenfeha has no effect on the direction of Microsoft i.e., Microsoft and Galenfeha go up and down completely randomly.

Pair Corralation between Microsoft and Galenfeha

Given the investment horizon of 90 days Microsoft is expected to generate 40.12 times less return on investment than Galenfeha. But when comparing it to its historical volatility, Microsoft is 46.65 times less risky than Galenfeha. It trades about 0.09 of its potential returns per unit of risk. Galenfeha is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3.31  in Galenfeha on September 24, 2024 and sell it today you would earn a total of  1,047  from holding Galenfeha or generate 31622.05% return on investment over 90 days.

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

Microsoft  vs.  Galenfeha

Microsoft

Risk-Adjusted Performance

2 of 100

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Galenfeha

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Galenfeha are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical and fundamental indicators, Galenfeha demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Galenfeha

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

The idea behind Microsoft and Galenfeha 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 Transaction History module to view history of all your transactions and understand their impact on performance.