Correlation Between Microsoft and Golden Grail
Can any of the company-specific risk be diversified away by investing in both Microsoft and Golden Grail 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 Golden Grail into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Golden Grail Technology, you can compare the effects of market volatilities on Microsoft and Golden Grail 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 Golden Grail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Golden Grail.
Diversification Opportunities for Microsoft and Golden Grail
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Golden is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Golden Grail Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Grail Technology 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 Golden Grail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Grail Technology has no effect on the direction of Microsoft i.e., Microsoft and Golden Grail go up and down completely randomly.
Pair Corralation between Microsoft and Golden Grail
Given the investment horizon of 90 days Microsoft is expected to generate 2.1 times less return on investment than Golden Grail. But when comparing it to its historical volatility, Microsoft is 8.4 times less risky than Golden Grail. It trades about 0.08 of its potential returns per unit of risk. Golden Grail Technology is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 42.00 in Golden Grail Technology on September 3, 2024 and sell it today you would lose (38.00) from holding Golden Grail Technology or give up 90.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Golden Grail Technology
Performance |
| Timeline |
| Microsoft |
| Golden Grail Technology |
Microsoft and Golden Grail Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Golden Grail
The main advantage of trading using opposite Microsoft and Golden Grail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Golden Grail 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 Golden Grail will offset losses from the drop in Golden Grail's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Golden Grail vs. Tencent Holdings | Golden Grail vs. Autohome | Golden Grail vs. Arena Group Holdings | Golden Grail vs. Asset Entities Class |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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