Correlation Between Microsoft and VanEck Morningstar

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

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

Diversification Opportunities for Microsoft and VanEck Morningstar

0.82

Correlation Coefficient

Microsoft  VanEck Morningstar

Very poor diversification

The 3 months correlation between Microsoft and VanEck is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and VanEck Morningstar Wide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Morningstar Wide 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 VanEck Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Morningstar Wide has no effect on the direction of Microsoft i.e., Microsoft and VanEck Morningstar go up and down completely randomly.

Pair Corralation between Microsoft and VanEck Morningstar

Given the investment horizon of 90 days Microsoft is expected to under-perform the VanEck Morningstar. In addition to that, Microsoft is 2.24 times more volatile than VanEck Morningstar Wide. It trades about -0.11 of its total potential returns per unit of risk. VanEck Morningstar Wide is currently generating about -0.12 per unit of volatility. If you would invest  13,262  in VanEck Morningstar Wide on December 30, 2024 and sell it today you would lose (703.00) from holding VanEck Morningstar Wide or give up 5.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.88%
Values	Daily Returns

Microsoft  vs.  VanEck Morningstar Wide

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.

VanEck Morningstar Wide

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck Morningstar Wide has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, VanEck Morningstar is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Microsoft and VanEck Morningstar

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

The idea behind Microsoft and VanEck Morningstar Wide 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.