Correlation Between Microsoft and Baron Health
Can any of the company-specific risk be diversified away by investing in both Microsoft and Baron Health 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 Baron Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Baron Health Care, you can compare the effects of market volatilities on Microsoft and Baron Health 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 Baron Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Baron Health.
Diversification Opportunities for Microsoft and Baron Health
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Baron is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Baron Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Health Care 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 Baron Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Health Care has no effect on the direction of Microsoft i.e., Microsoft and Baron Health go up and down completely randomly.
Pair Corralation between Microsoft and Baron Health
Given the investment horizon of 90 days Microsoft is expected to generate 1.11 times more return on investment than Baron Health. However, Microsoft is 1.11 times more volatile than Baron Health Care. It trades about 0.17 of its potential returns per unit of risk. Baron Health Care is currently generating about 0.07 per unit of risk. If you would invest 40,764 in Microsoft on September 3, 2024 and sell it today you would earn a total of 1,582 from holding Microsoft or generate 3.88% 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. Baron Health Care
Performance |
| Timeline |
| Microsoft |
| Baron Health Care |
Microsoft and Baron Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Baron Health
The main advantage of trading using opposite Microsoft and Baron Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Baron Health 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 Baron Health will offset losses from the drop in Baron Health's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Baron Health vs. Us Government Securities | Baron Health vs. Us Government Securities | Baron Health vs. Aig Government Money | Baron Health vs. Short Term Government 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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