Correlation Between Microsoft and SPDR Barclays

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

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

Diversification Opportunities for Microsoft and SPDR Barclays

-0.78

Correlation Coefficient

Microsoft  SPDR Barclays

Pay attention - limited upside

The 3 months correlation between Microsoft and SPDR is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SPDR Barclays Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Barclays Long 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 Barclays. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Barclays Long has no effect on the direction of Microsoft i.e., Microsoft and SPDR Barclays go up and down completely randomly.

Pair Corralation between Microsoft and SPDR Barclays

Given the investment horizon of 90 days Microsoft is expected to under-perform the SPDR Barclays. In addition to that, Microsoft is 2.16 times more volatile than SPDR Barclays Long. It trades about -0.08 of its total potential returns per unit of risk. SPDR Barclays Long is currently generating about 0.08 per unit of volatility. If you would invest  2,611  in SPDR Barclays Long on December 29, 2024 and sell it today you would earn a total of  93.00  from holding SPDR Barclays Long or generate 3.56% return on investment over 90 days.

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

Microsoft  vs.  SPDR Barclays Long

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.

SPDR Barclays Long

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Barclays Long are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, SPDR Barclays is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Microsoft and SPDR Barclays

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

The idea behind Microsoft and SPDR Barclays Long 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.