Correlation Between Microsoft and VanEck Africa
Can any of the company-specific risk be diversified away by investing in both Microsoft and VanEck Africa 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 VanEck Africa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and VanEck Africa Index, you can compare the effects of market volatilities on Microsoft and VanEck Africa 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 VanEck Africa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and VanEck Africa.
Diversification Opportunities for Microsoft and VanEck Africa
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Microsoft and VanEck is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and VanEck Africa Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Africa Index 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 VanEck Africa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Africa Index has no effect on the direction of Microsoft i.e., Microsoft and VanEck Africa go up and down completely randomly.
Pair Corralation between Microsoft and VanEck Africa
Given the investment horizon of 90 days Microsoft is expected to generate 0.9 times more return on investment than VanEck Africa. However, Microsoft is 1.11 times less risky than VanEck Africa. It trades about 0.05 of its potential returns per unit of risk. VanEck Africa Index is currently generating about 0.04 per unit of risk. If you would invest 40,862 in Microsoft on September 2, 2024 and sell it today you would earn a total of 1,484 from holding Microsoft or generate 3.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. VanEck Africa Index
Performance |
| Timeline |
| Microsoft |
| VanEck Africa Index |
Microsoft and VanEck Africa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and VanEck Africa
The main advantage of trading using opposite Microsoft and VanEck Africa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, VanEck Africa 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 VanEck Africa will offset losses from the drop in VanEck Africa's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| VanEck Africa vs. iShares MSCI South | VanEck Africa vs. VanEck Indonesia Index | VanEck Africa vs. iShares MSCI Thailand |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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