Correlation Between Microsoft and Vanguard Growth

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

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

Diversification Opportunities for Microsoft and Vanguard Growth

0.23

Correlation Coefficient

Microsoft  Vanguard Growth

Modest diversification

The 3 months correlation between Microsoft and Vanguard is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Vanguard Growth And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Growth And 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 Vanguard Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Growth And has no effect on the direction of Microsoft i.e., Microsoft and Vanguard Growth go up and down completely randomly.

Pair Corralation between Microsoft and Vanguard Growth

Given the investment horizon of 90 days Microsoft is expected to generate 2.37 times less return on investment than Vanguard Growth. In addition to that, Microsoft is 1.74 times more volatile than Vanguard Growth And. It trades about 0.05 of its total potential returns per unit of risk. Vanguard Growth And is currently generating about 0.2 per unit of volatility. If you would invest  6,454  in Vanguard Growth And on August 31, 2024 and sell it today you would earn a total of  637.00  from holding Vanguard Growth And or generate 9.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Microsoft  vs.  Vanguard Growth And

Microsoft

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 3 (%) 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.

Vanguard Growth And

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Growth And are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Growth may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Microsoft and Vanguard Growth

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

The idea behind Microsoft and Vanguard Growth And 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.