Correlation Between Microsoft and CBRE GROUP
Can any of the company-specific risk be diversified away by investing in both Microsoft and CBRE GROUP 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 CBRE GROUP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and CBRE GROUP A, you can compare the effects of market volatilities on Microsoft and CBRE GROUP 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 CBRE GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and CBRE GROUP.
Diversification Opportunities for Microsoft and CBRE GROUP
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microsoft and CBRE is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and CBRE GROUP A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CBRE GROUP A 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 CBRE GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CBRE GROUP A has no effect on the direction of Microsoft i.e., Microsoft and CBRE GROUP go up and down completely randomly.
Pair Corralation between Microsoft and CBRE GROUP
Assuming the 90 days trading horizon Microsoft is expected to generate 1.68 times less return on investment than CBRE GROUP. But when comparing it to its historical volatility, Microsoft is 1.32 times less risky than CBRE GROUP. It trades about 0.07 of its potential returns per unit of risk. CBRE GROUP A is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 7,888 in CBRE GROUP A on September 12, 2024 and sell it today you would earn a total of 5,112 from holding CBRE GROUP A or generate 64.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. CBRE GROUP A
Performance |
| Timeline |
| Microsoft |
| CBRE GROUP A |
Microsoft and CBRE GROUP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and CBRE GROUP
The main advantage of trading using opposite Microsoft and CBRE GROUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, CBRE GROUP 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 CBRE GROUP will offset losses from the drop in CBRE GROUP's long position.The idea behind Microsoft and CBRE GROUP A pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| CBRE GROUP vs. Entravision Communications | CBRE GROUP vs. Perdoceo Education | CBRE GROUP vs. Zoom Video Communications | CBRE GROUP vs. DEVRY EDUCATION GRP |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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