Correlation Between Microsoft and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Microsoft and Emerging Markets 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 Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Emerging Markets Fund, you can compare the effects of market volatilities on Microsoft and Emerging Markets 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 Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Emerging Markets.
Diversification Opportunities for Microsoft and Emerging Markets
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Emerging is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Emerging Markets Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 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 Emerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets has no effect on the direction of Microsoft i.e., Microsoft and Emerging Markets go up and down completely randomly.
Pair Corralation between Microsoft and Emerging Markets
Given the investment horizon of 90 days Microsoft is expected to generate 2.28 times more return on investment than Emerging Markets. However, Microsoft is 2.28 times more volatile than Emerging Markets Fund. It trades about -0.04 of its potential returns per unit of risk. Emerging Markets Fund is currently generating about -0.24 per unit of risk. If you would invest 42,388 in Microsoft on August 25, 2024 and sell it today you would lose (688.00) from holding Microsoft or give up 1.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Emerging Markets Fund
Performance |
| Timeline |
| Microsoft |
| Emerging Markets |
Microsoft and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Emerging Markets
The main advantage of trading using opposite Microsoft and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Emerging Markets 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 Emerging Markets will offset losses from the drop in Emerging Markets' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Emerging Markets vs. Unconstrained Emerging Markets | Emerging Markets vs. Unconstrained Emerging Markets | Emerging Markets vs. Unconstrained Emerging Markets | Emerging Markets vs. Emerging Markets Fund |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
Other Complementary Tools
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |