Correlation Between Microsoft and Guardian
Can any of the company-specific risk be diversified away by investing in both Microsoft and Guardian 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 Guardian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Guardian i3 Global, you can compare the effects of market volatilities on Microsoft and Guardian 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 Guardian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Guardian.
Diversification Opportunities for Microsoft and Guardian
Modest diversification
The 3 months correlation between Microsoft and Guardian is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Guardian i3 Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardian i3 Global 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 Guardian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardian i3 Global has no effect on the direction of Microsoft i.e., Microsoft and Guardian go up and down completely randomly.
Pair Corralation between Microsoft and Guardian
Given the investment horizon of 90 days Microsoft is expected to generate 0.88 times more return on investment than Guardian. However, Microsoft is 1.14 times less risky than Guardian. It trades about -0.21 of its potential returns per unit of risk. Guardian i3 Global is currently generating about -0.28 per unit of risk. If you would invest 41,416 in Microsoft on December 1, 2024 and sell it today you would lose (1,717) from holding Microsoft or give up 4.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Guardian i3 Global
Performance |
| Timeline |
| Microsoft |
| Guardian i3 Global |
Microsoft and Guardian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Guardian
The main advantage of trading using opposite Microsoft and Guardian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Guardian 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 Guardian will offset losses from the drop in Guardian's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| Guardian vs. Guardian i3 Quality | Guardian vs. Guardian Directed Premium | Guardian vs. Guardian Directed Equity | Guardian vs. CI ONE Global |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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