Correlation Between G8 EDUCATION and Microsoft
Can any of the company-specific risk be diversified away by investing in both G8 EDUCATION and Microsoft 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 G8 EDUCATION and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between G8 EDUCATION and Microsoft, you can compare the effects of market volatilities on G8 EDUCATION and Microsoft 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 G8 EDUCATION with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of G8 EDUCATION and Microsoft.
Diversification Opportunities for G8 EDUCATION and Microsoft
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 3EAG and Microsoft is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding G8 EDUCATION and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and G8 EDUCATION 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 G8 EDUCATION are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of G8 EDUCATION i.e., G8 EDUCATION and Microsoft go up and down completely randomly.
Pair Corralation between G8 EDUCATION and Microsoft
Assuming the 90 days trading horizon G8 EDUCATION is expected to under-perform the Microsoft. In addition to that, G8 EDUCATION is 1.03 times more volatile than Microsoft. It trades about -0.08 of its total potential returns per unit of risk. Microsoft is currently generating about 0.19 per unit of volatility. If you would invest 39,845 in Microsoft on September 25, 2024 and sell it today you would earn a total of 2,120 from holding Microsoft or generate 5.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
G8 EDUCATION vs. Microsoft
Performance |
| Timeline |
| G8 EDUCATION |
| Microsoft |
G8 EDUCATION and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with G8 EDUCATION and Microsoft
The main advantage of trading using opposite G8 EDUCATION and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G8 EDUCATION position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.| G8 EDUCATION vs. Apple Inc | G8 EDUCATION vs. Apple Inc | G8 EDUCATION vs. Apple Inc | G8 EDUCATION vs. Microsoft |
| Microsoft vs. American Public Education | Microsoft vs. G8 EDUCATION | Microsoft vs. TAL Education Group | Microsoft vs. ETFS Coffee ETC |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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