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 Developing, 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
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and American is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and American Funds Developing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Developing 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 Developing 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 generate 1.83 times more return on investment than American Funds. However, Microsoft is 1.83 times more volatile than American Funds Developing. It trades about 0.08 of its potential returns per unit of risk. American Funds Developing is currently generating about 0.04 per unit of risk. If you would invest 24,616 in Microsoft on August 25, 2024 and sell it today you would earn a total of 17,084 from holding Microsoft or generate 69.4% 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. American Funds Developing
Performance |
| Timeline |
| Microsoft |
| American Funds Developing |
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. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| American Funds vs. Franklin High Yield | American Funds vs. Ab Impact Municipal | American Funds vs. Transamerica Intermediate Muni | American Funds vs. Oklahoma Municipal 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
Other Complementary Tools
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites |