Correlation Between Microsoft and MSCI WORLD
Can any of the company-specific risk be diversified away by investing in both Microsoft and MSCI WORLD 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 MSCI WORLD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and MSCI WORLD CLIMATE, you can compare the effects of market volatilities on Microsoft and MSCI WORLD 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 MSCI WORLD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and MSCI WORLD.
Diversification Opportunities for Microsoft and MSCI WORLD
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microsoft and MSCI is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and MSCI WORLD CLIMATE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSCI WORLD CLIMATE 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 MSCI WORLD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSCI WORLD CLIMATE has no effect on the direction of Microsoft i.e., Microsoft and MSCI WORLD go up and down completely randomly.
Pair Corralation between Microsoft and MSCI WORLD
Assuming the 90 days trading horizon Microsoft is expected to generate 11.13 times less return on investment than MSCI WORLD. But when comparing it to its historical volatility, Microsoft is 2.57 times less risky than MSCI WORLD. It trades about 0.03 of its potential returns per unit of risk. MSCI WORLD CLIMATE is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 5,350 in MSCI WORLD CLIMATE on September 3, 2024 and sell it today you would earn a total of 2,600 from holding MSCI WORLD CLIMATE or generate 48.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.67% |
| Values | Daily Returns |
Microsoft vs. MSCI WORLD CLIMATE
Performance |
| Timeline |
| Microsoft |
| MSCI WORLD CLIMATE |
Microsoft and MSCI WORLD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and MSCI WORLD
The main advantage of trading using opposite Microsoft and MSCI WORLD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, MSCI WORLD 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 MSCI WORLD will offset losses from the drop in MSCI WORLD's long position.| Microsoft vs. ATRYS HEALTH SA | Microsoft vs. CHINA TONTINE WINES | Microsoft vs. Cardinal Health | Microsoft vs. National Health Investors |
| MSCI WORLD vs. MELIA HOTELS | MSCI WORLD vs. FRACTAL GAMING GROUP | MSCI WORLD vs. MHP Hotel AG | MSCI WORLD vs. Wyndham Hotels Resorts |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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