Correlation Between Microsoft and US Dollar
Can any of the company-specific risk be diversified away by investing in both Microsoft and US Dollar 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 US Dollar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and US Dollar, you can compare the effects of market volatilities on Microsoft and US Dollar 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 US Dollar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and US Dollar.
Diversification Opportunities for Microsoft and US Dollar
Good diversification
The 3 months correlation between Microsoft and DXUSD is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and US Dollar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Dollar 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 US Dollar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Dollar has no effect on the direction of Microsoft i.e., Microsoft and US Dollar go up and down completely randomly.
Pair Corralation between Microsoft and US Dollar
Given the investment horizon of 90 days Microsoft is expected to generate 3.38 times more return on investment than US Dollar. However, Microsoft is 3.38 times more volatile than US Dollar. It trades about 0.06 of its potential returns per unit of risk. US Dollar is currently generating about 0.02 per unit of risk. If you would invest 32,151 in Microsoft on August 31, 2024 and sell it today you would earn a total of 10,195 from holding Microsoft or generate 31.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.94% |
| Values | Daily Returns |
Microsoft vs. US Dollar
Performance |
| Timeline |
| Microsoft |
| US Dollar |
Microsoft and US Dollar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and US Dollar
The main advantage of trading using opposite Microsoft and US Dollar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, US Dollar 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 US Dollar will offset losses from the drop in US Dollar's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| US Dollar vs. Micro Silver Futures | US Dollar vs. 30 Day Fed | US Dollar vs. Mini Dow Jones | US Dollar vs. Gasoline RBOB |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments |