Correlation Between Microsoft and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both Microsoft and Goldman Sachs 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 Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Goldman Sachs Large, you can compare the effects of market volatilities on Microsoft and Goldman Sachs 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 Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Goldman Sachs.
Diversification Opportunities for Microsoft and Goldman Sachs
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Microsoft and Goldman is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Goldman Sachs Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Large 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 Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs Large has no effect on the direction of Microsoft i.e., Microsoft and Goldman Sachs go up and down completely randomly.
Pair Corralation between Microsoft and Goldman Sachs
Given the investment horizon of 90 days Microsoft is expected to generate 1.38 times less return on investment than Goldman Sachs. In addition to that, Microsoft is 1.2 times more volatile than Goldman Sachs Large. It trades about 0.19 of its total potential returns per unit of risk. Goldman Sachs Large is currently generating about 0.31 per unit of volatility. If you would invest 3,225 in Goldman Sachs Large on September 1, 2024 and sell it today you would earn a total of 202.00 from holding Goldman Sachs Large or generate 6.26% 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. Goldman Sachs Large
Performance |
| Timeline |
| Microsoft |
| Goldman Sachs Large |
Microsoft and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Goldman Sachs
The main advantage of trading using opposite Microsoft and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Goldman Sachs 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 Goldman Sachs will offset losses from the drop in Goldman Sachs' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Goldman Sachs vs. Goldman Sachs Large | Goldman Sachs vs. Goldman Sachs Small | Goldman Sachs vs. Goldman Sachs International | Goldman Sachs vs. Goldman Sachs Real |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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