Correlation Between Microsoft and Global X
Can any of the company-specific risk be diversified away by investing in both Microsoft and Global X 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 Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Global X DAX, you can compare the effects of market volatilities on Microsoft and Global X 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 Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Global X.
Diversification Opportunities for Microsoft and Global X
Modest diversification
The 3 months correlation between Microsoft and Global is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Global X DAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X DAX 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 Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X DAX has no effect on the direction of Microsoft i.e., Microsoft and Global X go up and down completely randomly.
Pair Corralation between Microsoft and Global X
Given the investment horizon of 90 days Microsoft is expected to generate 1.45 times more return on investment than Global X. However, Microsoft is 1.45 times more volatile than Global X DAX. It trades about 0.09 of its potential returns per unit of risk. Global X DAX is currently generating about 0.06 per unit of risk. If you would invest 24,146 in Microsoft on August 30, 2024 and sell it today you would earn a total of 18,153 from holding Microsoft or generate 75.18% 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. Global X DAX
Performance |
| Timeline |
| Microsoft |
| Global X DAX |
Microsoft and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Global X
The main advantage of trading using opposite Microsoft and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Global X 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 Global X will offset losses from the drop in Global X's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Global X vs. Camden National | Global X vs. iShares MSCI Germany | Global X vs. SPDR EURO STOXX | Global X vs. iShares MSCI France |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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