Correlation Between Microsoft and Congressional Effect
Can any of the company-specific risk be diversified away by investing in both Microsoft and Congressional Effect 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 Congressional Effect into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Congressional Effect Fund, you can compare the effects of market volatilities on Microsoft and Congressional Effect 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 Congressional Effect. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Congressional Effect.
Diversification Opportunities for Microsoft and Congressional Effect
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Microsoft and Congressional is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Congressional Effect Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Congressional Effect 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 Congressional Effect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Congressional Effect has no effect on the direction of Microsoft i.e., Microsoft and Congressional Effect go up and down completely randomly.
Pair Corralation between Microsoft and Congressional Effect
Given the investment horizon of 90 days Microsoft is expected to generate 2.1 times more return on investment than Congressional Effect. However, Microsoft is 2.1 times more volatile than Congressional Effect Fund. It trades about 0.17 of its potential returns per unit of risk. Congressional Effect Fund is currently generating about -0.06 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. Congressional Effect Fund
Performance |
| Timeline |
| Microsoft |
| Congressional Effect |
Microsoft and Congressional Effect Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Congressional Effect
The main advantage of trading using opposite Microsoft and Congressional Effect positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Congressional Effect 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 Congressional Effect will offset losses from the drop in Congressional Effect's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Congressional Effect vs. Dws Government Money | Congressional Effect vs. Schwab Treasury Money | Congressional Effect vs. Rbc Funds Trust | Congressional Effect vs. Aig Government Money |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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