Correlation Between Microsoft and SPDR Bloomberg

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

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

Diversification Opportunities for Microsoft and SPDR Bloomberg

-0.11

Correlation Coefficient

Microsoft  SPDR Bloomberg

Good diversification

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

Pair Corralation between Microsoft and SPDR Bloomberg

Given the investment horizon of 90 days Microsoft is expected to generate 2.62 times more return on investment than SPDR Bloomberg. However, Microsoft is 2.62 times more volatile than SPDR Bloomberg International. It trades about 0.02 of its potential returns per unit of risk. SPDR Bloomberg International is currently generating about 0.0 per unit of risk. If you would invest  42,050  in Microsoft on September 20, 2024 and sell it today you would earn a total of  1,653  from holding Microsoft or generate 3.93% return on investment over 90 days.

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

Microsoft  vs.  SPDR Bloomberg International

Microsoft

Risk-Adjusted Performance

1 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) 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.

SPDR Bloomberg Inter

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Bloomberg International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with Microsoft and SPDR Bloomberg

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

The idea behind Microsoft and SPDR Bloomberg International 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.