Correlation Between Microsoft and Gmo Resources
Can any of the company-specific risk be diversified away by investing in both Microsoft and Gmo Resources 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 Gmo Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Gmo Resources Fund, you can compare the effects of market volatilities on Microsoft and Gmo Resources 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 Gmo Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Gmo Resources.
Diversification Opportunities for Microsoft and Gmo Resources
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Gmo is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Gmo Resources Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Resources 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 Gmo Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Resources has no effect on the direction of Microsoft i.e., Microsoft and Gmo Resources go up and down completely randomly.
Pair Corralation between Microsoft and Gmo Resources
Given the investment horizon of 90 days Microsoft is expected to generate 1.06 times more return on investment than Gmo Resources. However, Microsoft is 1.06 times more volatile than Gmo Resources Fund. It trades about 0.12 of its potential returns per unit of risk. Gmo Resources Fund is currently generating about -0.07 per unit of risk. If you would invest 41,879 in Microsoft on October 26, 2024 and sell it today you would earn a total of 2,519 from holding Microsoft or generate 6.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Gmo Resources Fund
Performance |
| Timeline |
| Microsoft |
| Gmo Resources |
Microsoft and Gmo Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Gmo Resources
The main advantage of trading using opposite Microsoft and Gmo Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Gmo Resources 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 Gmo Resources will offset losses from the drop in Gmo Resources' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. BLOCK INC | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| Gmo Resources vs. Gmo E Plus | Gmo Resources vs. Gmo Trust | Gmo Resources vs. Gmo Treasury Fund | Gmo Resources vs. Gmo Trust |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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