Correlation Between Microsoft and GXC

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

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

Diversification Opportunities for Microsoft and GXC

0.0

Correlation Coefficient

Microsoft  GXC

Pay attention - limited upside

The 3 months correlation between Microsoft and GXC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and GXC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GXC 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 GXC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GXC has no effect on the direction of Microsoft i.e., Microsoft and GXC go up and down completely randomly.

Pair Corralation between Microsoft and GXC

If you would invest (100.00) in GXC on December 29, 2024 and sell it today you would earn a total of  100.00  from holding GXC or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Microsoft  vs.  GXC

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.

GXC

Risk-Adjusted Performance

Very Weak

Over the last 90 days GXC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, GXC 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 GXC

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

The idea behind Microsoft and GXC 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.