Correlation Between Microsoft and G III
Can any of the company-specific risk be diversified away by investing in both Microsoft and G III 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 G III into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and G III Apparel Group, you can compare the effects of market volatilities on Microsoft and G III 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 G III. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and G III.
Diversification Opportunities for Microsoft and G III
Very poor diversification
The 3 months correlation between Microsoft and GI4 is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and G III Apparel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G III Apparel 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 G III. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G III Apparel has no effect on the direction of Microsoft i.e., Microsoft and G III go up and down completely randomly.
Pair Corralation between Microsoft and G III
Assuming the 90 days trading horizon Microsoft is expected to generate 1.16 times less return on investment than G III. But when comparing it to its historical volatility, Microsoft is 2.27 times less risky than G III. It trades about 0.01 of its potential returns per unit of risk. G III Apparel Group is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,760 in G III Apparel Group on November 28, 2024 and sell it today you would lose (160.00) from holding G III Apparel Group or give up 5.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. G III Apparel Group
Performance |
| Timeline |
| Microsoft |
| G III Apparel |
Microsoft and G III Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and G III
The main advantage of trading using opposite Microsoft and G III positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, G III 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 G III will offset losses from the drop in G III's long position.| Microsoft vs. NTT DATA | Microsoft vs. Northern Data AG | Microsoft vs. Gaming and Leisure | Microsoft vs. Playa Hotels Resorts |
| G III vs. Tencent Music Entertainment | G III vs. ZINC MEDIA GR | G III vs. CODERE ONLINE LUX | G III vs. CARSALESCOM |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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