Correlation Between Microsoft and Global Net
Can any of the company-specific risk be diversified away by investing in both Microsoft and Global Net 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 Global Net into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Global Net Lease, you can compare the effects of market volatilities on Microsoft and Global Net 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 Global Net. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Global Net.
Diversification Opportunities for Microsoft and Global Net
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and Global is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Global Net Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Net Lease 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 Global Net. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Net Lease has no effect on the direction of Microsoft i.e., Microsoft and Global Net go up and down completely randomly.
Pair Corralation between Microsoft and Global Net
Given the investment horizon of 90 days Microsoft is expected to generate 1.23 times less return on investment than Global Net. But when comparing it to its historical volatility, Microsoft is 1.16 times less risky than Global Net. It trades about 0.05 of its potential returns per unit of risk. Global Net Lease is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,668 in Global Net Lease on August 27, 2024 and sell it today you would earn a total of 532.00 from holding Global Net Lease or generate 31.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Global Net Lease
Performance |
| Timeline |
| Microsoft |
| Global Net Lease |
Microsoft and Global Net Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Global Net
The main advantage of trading using opposite Microsoft and Global Net positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Global Net 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 Global Net will offset losses from the drop in Global Net's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| Global Net vs. Global Net Lease | Global Net vs. Global Medical REIT | Global Net vs. City Office REIT | Global Net vs. ARMOUR Residential REIT |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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