Correlation Between Dow Jones and Microsoft Corp
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Microsoft Corp 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 Dow Jones and Microsoft Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Microsoft Corp CDR, you can compare the effects of market volatilities on Dow Jones and Microsoft Corp 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 Dow Jones with a short position of Microsoft Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Microsoft Corp.
Diversification Opportunities for Dow Jones and Microsoft Corp
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Dow and Microsoft is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Microsoft Corp CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft Corp CDR and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Microsoft Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft Corp CDR has no effect on the direction of Dow Jones i.e., Dow Jones and Microsoft Corp go up and down completely randomly.
Pair Corralation between Dow Jones and Microsoft Corp
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.57 times more return on investment than Microsoft Corp. However, Dow Jones Industrial is 1.76 times less risky than Microsoft Corp. It trades about 0.13 of its potential returns per unit of risk. Microsoft Corp CDR is currently generating about 0.03 per unit of risk. If you would invest 3,541,698 in Dow Jones Industrial on August 24, 2024 and sell it today you would earn a total of 845,337 from holding Dow Jones Industrial or generate 23.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Dow Jones Industrial vs. Microsoft Corp CDR
Performance |
| Timeline |
Dow Jones and Microsoft Corp Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Microsoft Corp CDR
Pair trading matchups for Microsoft Corp
Pair Trading with Dow Jones and Microsoft Corp
The main advantage of trading using opposite Dow Jones and Microsoft Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Microsoft Corp 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 Corp will offset losses from the drop in Microsoft Corp's long position.| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
| Microsoft Corp vs. Plaza Retail REIT | Microsoft Corp vs. Constellation Software | Microsoft Corp vs. Highwood Asset Management | Microsoft Corp vs. Quisitive Technology Solutions |
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 CEOs Directory module to screen CEOs from public companies around the world.
Other Complementary Tools
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio |