Correlation Between Microsoft and Great-west Bond

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

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

Diversification Opportunities for Microsoft and Great-west Bond

-0.1

Correlation Coefficient

Microsoft  Great-west Bond

Good diversification

The 3 months correlation between Microsoft and Great-west is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Great West Bond Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Bond 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 Great-west Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great West Bond has no effect on the direction of Microsoft i.e., Microsoft and Great-west Bond go up and down completely randomly.

Pair Corralation between Microsoft and Great-west Bond

Given the investment horizon of 90 days Microsoft is expected to generate 3.2 times more return on investment than Great-west Bond. However, Microsoft is 3.2 times more volatile than Great West Bond Index. It trades about 0.03 of its potential returns per unit of risk. Great West Bond Index is currently generating about -0.21 per unit of risk. If you would invest  41,571  in Microsoft on October 3, 2024 and sell it today you would earn a total of  912.00  from holding Microsoft or generate 2.19% return on investment over 90 days.

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

Microsoft  vs.  Great West Bond Index

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

Great West Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great West Bond Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Great-west Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Great-west Bond

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

The idea behind Microsoft and Great West Bond Index 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.

Check out your portfolio center.

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 Commodity Directory module to find actively traded commodities issued by global exchanges.