Correlation Between Microsoft and General American
Can any of the company-specific risk be diversified away by investing in both Microsoft and General American 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 General American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and General American Investors, you can compare the effects of market volatilities on Microsoft and General American 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 General American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and General American.
Diversification Opportunities for Microsoft and General American
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and General is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and General American Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General American Inv 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 General American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General American Inv has no effect on the direction of Microsoft i.e., Microsoft and General American go up and down completely randomly.
Pair Corralation between Microsoft and General American
Given the investment horizon of 90 days Microsoft is expected to generate 1.06 times less return on investment than General American. In addition to that, Microsoft is 2.52 times more volatile than General American Investors. It trades about 0.03 of its total potential returns per unit of risk. General American Investors is currently generating about 0.09 per unit of volatility. If you would invest 2,511 in General American Investors on August 28, 2024 and sell it today you would earn a total of 70.00 from holding General American Investors or generate 2.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.44% |
| Values | Daily Returns |
Microsoft vs. General American Investors
Performance |
| Timeline |
| Microsoft |
| General American Inv |
Microsoft and General American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and General American
The main advantage of trading using opposite Microsoft and General American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, General American 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 General American will offset losses from the drop in General American's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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