Correlation Between Microsoft and Guidestone Growth
Can any of the company-specific risk be diversified away by investing in both Microsoft and Guidestone Growth 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 Guidestone Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Guidestone Growth Equity, you can compare the effects of market volatilities on Microsoft and Guidestone Growth 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 Guidestone Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Guidestone Growth.
Diversification Opportunities for Microsoft and Guidestone Growth
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Guidestone is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Guidestone Growth Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidestone Growth Equity 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 Guidestone Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidestone Growth Equity has no effect on the direction of Microsoft i.e., Microsoft and Guidestone Growth go up and down completely randomly.
Pair Corralation between Microsoft and Guidestone Growth
Given the investment horizon of 90 days Microsoft is expected to generate 4.19 times less return on investment than Guidestone Growth. In addition to that, Microsoft is 1.13 times more volatile than Guidestone Growth Equity. It trades about 0.02 of its total potential returns per unit of risk. Guidestone Growth Equity is currently generating about 0.11 per unit of volatility. If you would invest 1,424 in Guidestone Growth Equity on September 3, 2024 and sell it today you would earn a total of 249.00 from holding Guidestone Growth Equity or generate 17.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Guidestone Growth Equity
Performance |
| Timeline |
| Microsoft |
| Guidestone Growth Equity |
Microsoft and Guidestone Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Guidestone Growth
The main advantage of trading using opposite Microsoft and Guidestone Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Guidestone Growth 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 Guidestone Growth will offset losses from the drop in Guidestone Growth's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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