Correlation Between Microsoft and PGF Capital
Can any of the company-specific risk be diversified away by investing in both Microsoft and PGF Capital 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 PGF Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and PGF Capital Bhd, you can compare the effects of market volatilities on Microsoft and PGF Capital 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 PGF Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and PGF Capital.
Diversification Opportunities for Microsoft and PGF Capital
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and PGF is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and PGF Capital Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGF Capital Bhd 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 PGF Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGF Capital Bhd has no effect on the direction of Microsoft i.e., Microsoft and PGF Capital go up and down completely randomly.
Pair Corralation between Microsoft and PGF Capital
Given the investment horizon of 90 days Microsoft is expected to generate 2.34 times less return on investment than PGF Capital. But when comparing it to its historical volatility, Microsoft is 1.9 times less risky than PGF Capital. It trades about 0.07 of its potential returns per unit of risk. PGF Capital Bhd is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 126.00 in PGF Capital Bhd on September 3, 2024 and sell it today you would earn a total of 84.00 from holding PGF Capital Bhd or generate 66.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.06% |
| Values | Daily Returns |
Microsoft vs. PGF Capital Bhd
Performance |
| Timeline |
| Microsoft |
| PGF Capital Bhd |
Microsoft and PGF Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and PGF Capital
The main advantage of trading using opposite Microsoft and PGF Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, PGF Capital 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 PGF Capital will offset losses from the drop in PGF Capital's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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