Correlation Between GEAR4MUSIC and Microsoft
Can any of the company-specific risk be diversified away by investing in both GEAR4MUSIC 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 GEAR4MUSIC and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GEAR4MUSIC LS 10 and Microsoft, you can compare the effects of market volatilities on GEAR4MUSIC 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 GEAR4MUSIC with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of GEAR4MUSIC and Microsoft.
Diversification Opportunities for GEAR4MUSIC and Microsoft
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GEAR4MUSIC and Microsoft is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding GEAR4MUSIC LS 10 and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and GEAR4MUSIC 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 GEAR4MUSIC LS 10 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 GEAR4MUSIC i.e., GEAR4MUSIC and Microsoft go up and down completely randomly.
Pair Corralation between GEAR4MUSIC and Microsoft
Assuming the 90 days horizon GEAR4MUSIC LS 10 is expected to generate 2.36 times more return on investment than Microsoft. However, GEAR4MUSIC is 2.36 times more volatile than Microsoft. It trades about 0.06 of its potential returns per unit of risk. Microsoft is currently generating about 0.06 per unit of risk. If you would invest 113.00 in GEAR4MUSIC LS 10 on August 31, 2024 and sell it today you would earn a total of 82.00 from holding GEAR4MUSIC LS 10 or generate 72.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.74% |
| Values | Daily Returns |
GEAR4MUSIC LS 10 vs. Microsoft
Performance |
| Timeline |
| GEAR4MUSIC LS 10 |
| Microsoft |
GEAR4MUSIC and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GEAR4MUSIC and Microsoft
The main advantage of trading using opposite GEAR4MUSIC and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GEAR4MUSIC 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.| GEAR4MUSIC vs. ETFS Coffee ETC | GEAR4MUSIC vs. JAPAN TOBACCO UNSPADR12 | GEAR4MUSIC vs. ScanSource | GEAR4MUSIC vs. Hanison Construction Holdings |
| Microsoft vs. PLAYTIKA HOLDING DL 01 | Microsoft vs. Apollo Investment Corp | Microsoft vs. MGIC INVESTMENT | Microsoft vs. LG Display Co |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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