Correlation Between Microsoft and New Germany
Can any of the company-specific risk be diversified away by investing in both Microsoft and New Germany 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 New Germany into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and New Germany Closed, you can compare the effects of market volatilities on Microsoft and New Germany 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 New Germany. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and New Germany.
Diversification Opportunities for Microsoft and New Germany
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and New is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and New Germany Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Germany Closed 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 New Germany. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Germany Closed has no effect on the direction of Microsoft i.e., Microsoft and New Germany go up and down completely randomly.
Pair Corralation between Microsoft and New Germany
Given the investment horizon of 90 days Microsoft is expected to generate 1.37 times more return on investment than New Germany. However, Microsoft is 1.37 times more volatile than New Germany Closed. It trades about 0.09 of its potential returns per unit of risk. New Germany Closed is currently generating about -0.03 per unit of risk. If you would invest 25,262 in Microsoft on August 27, 2024 and sell it today you would earn a total of 16,438 from holding Microsoft or generate 65.07% 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. New Germany Closed
Performance |
| Timeline |
| Microsoft |
| New Germany Closed |
Microsoft and New Germany Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and New Germany
The main advantage of trading using opposite Microsoft and New Germany positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, New Germany 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 New Germany will offset losses from the drop in New Germany's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| New Germany vs. Eagle Point Income | New Germany vs. Western Asset High | New Germany vs. Nuveen New York | New Germany vs. Western Asset High |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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