Correlation Between Microsoft and Consumer Staples
Can any of the company-specific risk be diversified away by investing in both Microsoft and Consumer Staples 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 Consumer Staples into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Consumer Staples Portfolio, you can compare the effects of market volatilities on Microsoft and Consumer Staples 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 Consumer Staples. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Consumer Staples.
Diversification Opportunities for Microsoft and Consumer Staples
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Consumer is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Consumer Staples Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Staples Por 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 Consumer Staples. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Staples Por has no effect on the direction of Microsoft i.e., Microsoft and Consumer Staples go up and down completely randomly.
Pair Corralation between Microsoft and Consumer Staples
Given the investment horizon of 90 days Microsoft is expected to generate 1.78 times more return on investment than Consumer Staples. However, Microsoft is 1.78 times more volatile than Consumer Staples Portfolio. It trades about 0.19 of its potential returns per unit of risk. Consumer Staples Portfolio is currently generating about 0.27 per unit of risk. If you would invest 40,554 in Microsoft on September 1, 2024 and sell it today you would earn a total of 1,792 from holding Microsoft or generate 4.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Microsoft vs. Consumer Staples Portfolio
Performance |
| Timeline |
| Microsoft |
| Consumer Staples Por |
Microsoft and Consumer Staples Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Consumer Staples
The main advantage of trading using opposite Microsoft and Consumer Staples positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Consumer Staples 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 Consumer Staples will offset losses from the drop in Consumer Staples' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
Other Complementary Tools
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites |