Correlation Between Microsoft and American Funds
Can any of the company-specific risk be diversified away by investing in both Microsoft and American Funds 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 American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and American Funds Strategic, you can compare the effects of market volatilities on Microsoft and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and American Funds.
Diversification Opportunities for Microsoft and American Funds
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and American is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and American Funds Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Strategic 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Strategic has no effect on the direction of Microsoft i.e., Microsoft and American Funds go up and down completely randomly.
Pair Corralation between Microsoft and American Funds
Given the investment horizon of 90 days Microsoft is expected to under-perform the American Funds. In addition to that, Microsoft is 4.79 times more volatile than American Funds Strategic. It trades about -0.04 of its total potential returns per unit of risk. American Funds Strategic is currently generating about -0.03 per unit of volatility. If you would invest 912.00 in American Funds Strategic on August 28, 2024 and sell it today you would lose (2.00) from holding American Funds Strategic or give up 0.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. American Funds Strategic
Performance |
| Timeline |
| Microsoft |
| American Funds Strategic |
Microsoft and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and American Funds
The main advantage of trading using opposite Microsoft and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| American Funds vs. Income Fund Of | American Funds vs. New World Fund | American Funds vs. American Mutual Fund | American Funds vs. American Mutual Fund |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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