Correlation Between Microsoft and Graph
Can any of the company-specific risk be diversified away by investing in both Microsoft and Graph 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 Graph into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and The Graph, you can compare the effects of market volatilities on Microsoft and Graph 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 Graph. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Graph.
Diversification Opportunities for Microsoft and Graph
Average diversification
The 3 months correlation between Microsoft and Graph is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and The Graph in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graph 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 Graph. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graph has no effect on the direction of Microsoft i.e., Microsoft and Graph go up and down completely randomly.
Pair Corralation between Microsoft and Graph
Given the investment horizon of 90 days Microsoft is expected to under-perform the Graph. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 3.74 times less risky than Graph. The stock trades about -0.05 of its potential returns per unit of risk. The The Graph is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 16.00 in The Graph on August 27, 2024 and sell it today you would earn a total of 9.00 from holding The Graph or generate 56.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. The Graph
Performance |
| Timeline |
| Microsoft |
| Graph |
Microsoft and Graph Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Graph
The main advantage of trading using opposite Microsoft and Graph positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Graph 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 Graph will offset losses from the drop in Graph's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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