Correlation Between Microsoft and GQG Partners

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

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

Diversification Opportunities for Microsoft and GQG Partners

-0.45

Correlation Coefficient

Microsoft  GQG Partners

Very good diversification

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

Pair Corralation between Microsoft and GQG Partners

Given the investment horizon of 90 days Microsoft is expected to under-perform the GQG Partners. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.4 times less risky than GQG Partners. The stock trades about -0.11 of its potential returns per unit of risk. The GQG Partners DRC is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  203.00  in GQG Partners DRC on December 30, 2024 and sell it today you would earn a total of  15.00  from holding GQG Partners DRC or generate 7.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

Microsoft  vs.  GQG Partners DRC

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.

GQG Partners DRC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GQG Partners DRC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, GQG Partners may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Microsoft and GQG Partners

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

The idea behind Microsoft and GQG Partners DRC 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.