Correlation Between Microsoft and Causeway Emerging
Can any of the company-specific risk be diversified away by investing in both Microsoft and Causeway Emerging 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 Causeway Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Causeway Emerging Markets, you can compare the effects of market volatilities on Microsoft and Causeway Emerging 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 Causeway Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Causeway Emerging.
Diversification Opportunities for Microsoft and Causeway Emerging
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Causeway is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Causeway Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Causeway Emerging Markets 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 Causeway Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Causeway Emerging Markets has no effect on the direction of Microsoft i.e., Microsoft and Causeway Emerging go up and down completely randomly.
Pair Corralation between Microsoft and Causeway Emerging
Given the investment horizon of 90 days Microsoft is expected to generate 1.8 times more return on investment than Causeway Emerging. However, Microsoft is 1.8 times more volatile than Causeway Emerging Markets. It trades about -0.06 of its potential returns per unit of risk. Causeway Emerging Markets is currently generating about -0.19 per unit of risk. If you would invest 42,729 in Microsoft on August 26, 2024 and sell it today you would lose (1,029) from holding Microsoft or give up 2.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Causeway Emerging Markets
Performance |
| Timeline |
| Microsoft |
| Causeway Emerging Markets |
Microsoft and Causeway Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Causeway Emerging
The main advantage of trading using opposite Microsoft and Causeway Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Causeway Emerging 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 Causeway Emerging will offset losses from the drop in Causeway Emerging's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Rapid7 Inc |
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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