Correlation Between GMO Internet and Microsoft
Can any of the company-specific risk be diversified away by investing in both GMO Internet 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 GMO Internet and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMO Internet and Microsoft, you can compare the effects of market volatilities on GMO Internet 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 GMO Internet with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMO Internet and Microsoft.
Diversification Opportunities for GMO Internet and Microsoft
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GMO and Microsoft is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding GMO Internet and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and GMO Internet 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 GMO Internet 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 GMO Internet i.e., GMO Internet and Microsoft go up and down completely randomly.
Pair Corralation between GMO Internet and Microsoft
Assuming the 90 days horizon GMO Internet is expected to under-perform the Microsoft. In addition to that, GMO Internet is 1.21 times more volatile than Microsoft. It trades about 0.0 of its total potential returns per unit of risk. Microsoft is currently generating about 0.08 per unit of volatility. If you would invest 40,055 in Microsoft on October 30, 2024 and sell it today you would earn a total of 1,350 from holding Microsoft or generate 3.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GMO Internet vs. Microsoft
Performance |
| Timeline |
| GMO Internet |
| Microsoft |
GMO Internet and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMO Internet and Microsoft
The main advantage of trading using opposite GMO Internet and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMO Internet 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.| GMO Internet vs. Genertec Universal Medical | GMO Internet vs. Casio Computer CoLtd | GMO Internet vs. SCOTT TECHNOLOGY | GMO Internet vs. X FAB Silicon Foundries |
| Microsoft vs. HELIOS TECHS INC | Microsoft vs. Allegheny Technologies Incorporated | Microsoft vs. Kingdee International Software | Microsoft vs. Addus HomeCare |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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