Correlation Between Microsoft Corp and Gildan Activewear
Can any of the company-specific risk be diversified away by investing in both Microsoft Corp and Gildan Activewear 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 Corp and Gildan Activewear into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft Corp CDR and Gildan Activewear, you can compare the effects of market volatilities on Microsoft Corp and Gildan Activewear 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 Corp with a short position of Gildan Activewear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft Corp and Gildan Activewear.
Diversification Opportunities for Microsoft Corp and Gildan Activewear
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Gildan is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp CDR and Gildan Activewear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gildan Activewear and Microsoft Corp 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 Corp CDR are associated (or correlated) with Gildan Activewear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gildan Activewear has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and Gildan Activewear go up and down completely randomly.
Pair Corralation between Microsoft Corp and Gildan Activewear
Assuming the 90 days trading horizon Microsoft Corp is expected to generate 1.85 times less return on investment than Gildan Activewear. But when comparing it to its historical volatility, Microsoft Corp CDR is 1.38 times less risky than Gildan Activewear. It trades about 0.08 of its potential returns per unit of risk. Gildan Activewear is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 3,843 in Gildan Activewear on September 12, 2024 and sell it today you would earn a total of 2,998 from holding Gildan Activewear or generate 78.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft Corp CDR vs. Gildan Activewear
Performance |
| Timeline |
| Microsoft Corp CDR |
| Gildan Activewear |
Microsoft Corp and Gildan Activewear Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft Corp and Gildan Activewear
The main advantage of trading using opposite Microsoft Corp and Gildan Activewear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft Corp position performs unexpectedly, Gildan Activewear 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 Gildan Activewear will offset losses from the drop in Gildan Activewear's long position.| Microsoft Corp vs. Apple Inc CDR | Microsoft Corp vs. NVIDIA CDR | Microsoft Corp vs. Amazon CDR | Microsoft Corp vs. Alphabet Inc CDR |
| Gildan Activewear vs. Apple Inc CDR | Gildan Activewear vs. NVIDIA CDR | Gildan Activewear vs. Microsoft Corp CDR | Gildan Activewear vs. Amazon CDR |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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