Correlation Between Microsoft and ProShares Trust
Can any of the company-specific risk be diversified away by investing in both Microsoft and ProShares Trust 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 ProShares Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and ProShares Trust , you can compare the effects of market volatilities on Microsoft and ProShares Trust 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 ProShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and ProShares Trust.
Diversification Opportunities for Microsoft and ProShares Trust
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and ProShares is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and ProShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Trust 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 ProShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Trust has no effect on the direction of Microsoft i.e., Microsoft and ProShares Trust go up and down completely randomly.
Pair Corralation between Microsoft and ProShares Trust
Given the investment horizon of 90 days Microsoft is expected to generate 0.84 times more return on investment than ProShares Trust. However, Microsoft is 1.19 times less risky than ProShares Trust. It trades about 0.05 of its potential returns per unit of risk. ProShares Trust is currently generating about 0.02 per unit of risk. If you would invest 36,820 in Microsoft on September 2, 2024 and sell it today you would earn a total of 5,526 from holding Microsoft or generate 15.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.19% |
| Values | Daily Returns |
Microsoft vs. ProShares Trust
Performance |
| Timeline |
| Microsoft |
| ProShares Trust |
Microsoft and ProShares Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and ProShares Trust
The main advantage of trading using opposite Microsoft and ProShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, ProShares Trust 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 ProShares Trust will offset losses from the drop in ProShares Trust's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| ProShares Trust vs. Promotora y Operadora | ProShares Trust vs. UnitedHealth Group Incorporated | ProShares Trust vs. Qulitas Controladora SAB | ProShares Trust vs. Hoteles City Express |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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