Correlation Between Microsoft and GREENLIGHT CAP
Can any of the company-specific risk be diversified away by investing in both Microsoft and GREENLIGHT CAP 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 GREENLIGHT CAP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and GREENLIGHT CAP RE, you can compare the effects of market volatilities on Microsoft and GREENLIGHT CAP 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 GREENLIGHT CAP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and GREENLIGHT CAP.
Diversification Opportunities for Microsoft and GREENLIGHT CAP
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Microsoft and GREENLIGHT is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and GREENLIGHT CAP RE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GREENLIGHT CAP RE 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 GREENLIGHT CAP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GREENLIGHT CAP RE has no effect on the direction of Microsoft i.e., Microsoft and GREENLIGHT CAP go up and down completely randomly.
Pair Corralation between Microsoft and GREENLIGHT CAP
Given the investment horizon of 90 days Microsoft is expected to generate 1.28 times more return on investment than GREENLIGHT CAP. However, Microsoft is 1.28 times more volatile than GREENLIGHT CAP RE. It trades about 0.17 of its potential returns per unit of risk. GREENLIGHT CAP RE is currently generating about -0.35 per unit of risk. If you would invest 41,879 in Microsoft on September 24, 2024 and sell it today you would earn a total of 1,781 from holding Microsoft or generate 4.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Microsoft vs. GREENLIGHT CAP RE
Performance |
| Timeline |
| Microsoft |
| GREENLIGHT CAP RE |
Microsoft and GREENLIGHT CAP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and GREENLIGHT CAP
The main advantage of trading using opposite Microsoft and GREENLIGHT CAP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, GREENLIGHT CAP 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 GREENLIGHT CAP will offset losses from the drop in GREENLIGHT CAP's long position.| Microsoft vs. BlackBerry | Microsoft vs. Global Blue Group | Microsoft vs. Aurora Mobile | Microsoft vs. Marqeta |
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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