Correlation Between Microsoft and Harding Loevner
Can any of the company-specific risk be diversified away by investing in both Microsoft and Harding Loevner 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 Harding Loevner into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Harding Loevner Frontier, you can compare the effects of market volatilities on Microsoft and Harding Loevner 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 Harding Loevner. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Harding Loevner.
Diversification Opportunities for Microsoft and Harding Loevner
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Harding is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Harding Loevner Frontier in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harding Loevner Frontier 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 Harding Loevner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harding Loevner Frontier has no effect on the direction of Microsoft i.e., Microsoft and Harding Loevner go up and down completely randomly.
Pair Corralation between Microsoft and Harding Loevner
Given the investment horizon of 90 days Microsoft is expected to generate 4.2 times more return on investment than Harding Loevner. However, Microsoft is 4.2 times more volatile than Harding Loevner Frontier. It trades about -0.04 of its potential returns per unit of risk. Harding Loevner Frontier is currently generating about -0.21 per unit of risk. If you would invest 43,109 in Microsoft on August 30, 2024 and sell it today you would lose (810.00) from holding Microsoft or give up 1.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Harding Loevner Frontier
Performance |
| Timeline |
| Microsoft |
| Harding Loevner Frontier |
Microsoft and Harding Loevner Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Harding Loevner
The main advantage of trading using opposite Microsoft and Harding Loevner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Harding Loevner 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 Harding Loevner will offset losses from the drop in Harding Loevner's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Harding Loevner vs. Vanguard Emerging Markets | Harding Loevner vs. Vanguard Emerging Markets | Harding Loevner vs. HUMANA INC | Harding Loevner vs. Aquagold International |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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