Correlation Between Microsoft and State Street
Can any of the company-specific risk be diversified away by investing in both Microsoft and State Street 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 State Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and State Street Target, you can compare the effects of market volatilities on Microsoft and State Street 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 State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and State Street.
Diversification Opportunities for Microsoft and State Street
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and State is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and State Street Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Target 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Target has no effect on the direction of Microsoft i.e., Microsoft and State Street go up and down completely randomly.
Pair Corralation between Microsoft and State Street
Given the investment horizon of 90 days Microsoft is expected to under-perform the State Street. In addition to that, Microsoft is 4.8 times more volatile than State Street Target. It trades about -0.08 of its total potential returns per unit of risk. State Street Target is currently generating about 0.07 per unit of volatility. If you would invest 1,075 in State Street Target on December 29, 2024 and sell it today you would earn a total of 15.00 from holding State Street Target or generate 1.4% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Microsoft vs. State Street Target
Performance |
Timeline |
Microsoft |
State Street Target |
Microsoft and State Street Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and State Street
The main advantage of trading using opposite Microsoft and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, State Street 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 State Street will offset losses from the drop in State Street's long position.Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
State Street vs. Legg Mason Global | State Street vs. Guidemark Large Cap | State Street vs. Pnc Balanced Allocation | State Street vs. Barings Global Floating |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
Other Complementary Tools
Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities |