Correlation Between Microsoft and Global Standard
Can any of the company-specific risk be diversified away by investing in both Microsoft and Global Standard 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 Global Standard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Global Standard Technology, you can compare the effects of market volatilities on Microsoft and Global Standard 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 Global Standard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Global Standard.
Diversification Opportunities for Microsoft and Global Standard
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Global is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Global Standard Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Standard Tech 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 Global Standard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Standard Tech has no effect on the direction of Microsoft i.e., Microsoft and Global Standard go up and down completely randomly.
Pair Corralation between Microsoft and Global Standard
Given the investment horizon of 90 days Microsoft is expected to generate 3.25 times less return on investment than Global Standard. But when comparing it to its historical volatility, Microsoft is 1.68 times less risky than Global Standard. It trades about 0.19 of its potential returns per unit of risk. Global Standard Technology is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 1,674,000 in Global Standard Technology on October 29, 2024 and sell it today you would earn a total of 275,000 from holding Global Standard Technology or generate 16.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Microsoft vs. Global Standard Technology
Performance |
| Timeline |
| Microsoft |
| Global Standard Tech |
Microsoft and Global Standard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Global Standard
The main advantage of trading using opposite Microsoft and Global Standard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Global Standard 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 Global Standard will offset losses from the drop in Global Standard's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. BLOCK INC | Microsoft vs. Adobe Systems Incorporated |
| Global Standard vs. KMH Hitech Co | Global Standard vs. BGF Retail Co | Global Standard vs. Vitzro Tech Co | Global Standard vs. Korean Drug Co |
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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