Correlation Between Microsoft and IMGP DBi
Can any of the company-specific risk be diversified away by investing in both Microsoft and IMGP DBi 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 IMGP DBi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and iMGP DBi Managed, you can compare the effects of market volatilities on Microsoft and IMGP DBi 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 IMGP DBi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and IMGP DBi.
Diversification Opportunities for Microsoft and IMGP DBi
Weak diversification
The 3 months correlation between Microsoft and IMGP is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and iMGP DBi Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iMGP DBi Managed 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 IMGP DBi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iMGP DBi Managed has no effect on the direction of Microsoft i.e., Microsoft and IMGP DBi go up and down completely randomly.
Pair Corralation between Microsoft and IMGP DBi
Given the investment horizon of 90 days Microsoft is expected to generate 2.06 times more return on investment than IMGP DBi. However, Microsoft is 2.06 times more volatile than iMGP DBi Managed. It trades about 0.08 of its potential returns per unit of risk. iMGP DBi Managed is currently generating about 0.0 per unit of risk. If you would invest 24,616 in Microsoft on August 24, 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. iMGP DBi Managed
Performance |
| Timeline |
| Microsoft |
| iMGP DBi Managed |
Microsoft and IMGP DBi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and IMGP DBi
The main advantage of trading using opposite Microsoft and IMGP DBi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, IMGP DBi 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 IMGP DBi will offset losses from the drop in IMGP DBi's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| IMGP DBi vs. KFA Mount Lucas | IMGP DBi vs. Simplify Exchange Traded | IMGP DBi vs. Simplify Interest Rate | IMGP DBi vs. First Trust Managed |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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