Correlation Between Microsoft and GT Capital
Can any of the company-specific risk be diversified away by investing in both Microsoft and GT Capital 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 GT Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and GT Capital Holdings, you can compare the effects of market volatilities on Microsoft and GT Capital 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 GT Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and GT Capital.
Diversification Opportunities for Microsoft and GT Capital
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microsoft and GTCAP is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and GT Capital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GT Capital Holdings 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 GT Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GT Capital Holdings has no effect on the direction of Microsoft i.e., Microsoft and GT Capital go up and down completely randomly.
Pair Corralation between Microsoft and GT Capital
Given the investment horizon of 90 days Microsoft is expected to generate 0.69 times more return on investment than GT Capital. However, Microsoft is 1.45 times less risky than GT Capital. It trades about -0.05 of its potential returns per unit of risk. GT Capital Holdings is currently generating about -0.14 per unit of risk. If you would invest 41,901 in Microsoft on December 30, 2024 and sell it today you would lose (4,021) from holding Microsoft or give up 9.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.19% |
| Values | Daily Returns |
Microsoft vs. GT Capital Holdings
Performance |
| Timeline |
| Microsoft |
| GT Capital Holdings |
Microsoft and GT Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and GT Capital
The main advantage of trading using opposite Microsoft and GT Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, GT Capital 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 GT Capital will offset losses from the drop in GT Capital's long position.| Microsoft vs. Palo Alto Networks | ||
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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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