Correlation Between Microsoft and Invesco CurrencyShares
Can any of the company-specific risk be diversified away by investing in both Microsoft and Invesco CurrencyShares 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 Invesco CurrencyShares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Invesco CurrencyShares Canadian, you can compare the effects of market volatilities on Microsoft and Invesco CurrencyShares 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 Invesco CurrencyShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Invesco CurrencyShares.
Diversification Opportunities for Microsoft and Invesco CurrencyShares
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Invesco is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Invesco CurrencyShares Canadia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco CurrencyShares 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 Invesco CurrencyShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco CurrencyShares has no effect on the direction of Microsoft i.e., Microsoft and Invesco CurrencyShares go up and down completely randomly.
Pair Corralation between Microsoft and Invesco CurrencyShares
Given the investment horizon of 90 days Microsoft is expected to generate 4.69 times more return on investment than Invesco CurrencyShares. However, Microsoft is 4.69 times more volatile than Invesco CurrencyShares Canadian. It trades about -0.02 of its potential returns per unit of risk. Invesco CurrencyShares Canadian is currently generating about -0.26 per unit of risk. If you would invest 42,944 in Microsoft on August 31, 2024 and sell it today you would lose (645.00) from holding Microsoft or give up 1.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Invesco CurrencyShares Canadia
Performance |
| Timeline |
| Microsoft |
| Invesco CurrencyShares |
Microsoft and Invesco CurrencyShares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Invesco CurrencyShares
The main advantage of trading using opposite Microsoft and Invesco CurrencyShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Invesco CurrencyShares 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 Invesco CurrencyShares will offset losses from the drop in Invesco CurrencyShares' 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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