Correlation Between Microsoft and Xtrackers International
Can any of the company-specific risk be diversified away by investing in both Microsoft and Xtrackers International 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 Xtrackers International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Xtrackers International Real, you can compare the effects of market volatilities on Microsoft and Xtrackers International 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 Xtrackers International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Xtrackers International.
Diversification Opportunities for Microsoft and Xtrackers International
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Xtrackers is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Xtrackers International Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers International 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 Xtrackers International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers International has no effect on the direction of Microsoft i.e., Microsoft and Xtrackers International go up and down completely randomly.
Pair Corralation between Microsoft and Xtrackers International
Given the investment horizon of 90 days Microsoft is expected to generate 1.27 times more return on investment than Xtrackers International. However, Microsoft is 1.27 times more volatile than Xtrackers International Real. It trades about 0.04 of its potential returns per unit of risk. Xtrackers International Real is currently generating about 0.03 per unit of risk. If you would invest 37,610 in Microsoft on August 26, 2024 and sell it today you would earn a total of 4,090 from holding Microsoft or generate 10.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Xtrackers International Real
Performance |
| Timeline |
| Microsoft |
| Xtrackers International |
Microsoft and Xtrackers International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Xtrackers International
The main advantage of trading using opposite Microsoft and Xtrackers International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Xtrackers International 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 Xtrackers International will offset losses from the drop in Xtrackers International's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Rapid7 Inc |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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