Correlation Between Microsoft and Pacer Developed
Can any of the company-specific risk be diversified away by investing in both Microsoft and Pacer Developed 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 Pacer Developed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Pacer Developed Markets, you can compare the effects of market volatilities on Microsoft and Pacer Developed 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 Pacer Developed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Pacer Developed.
Diversification Opportunities for Microsoft and Pacer Developed
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Pacer is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Pacer Developed Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Developed Markets 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 Pacer Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Developed Markets has no effect on the direction of Microsoft i.e., Microsoft and Pacer Developed go up and down completely randomly.
Pair Corralation between Microsoft and Pacer Developed
Given the investment horizon of 90 days Microsoft is expected to generate 1.61 times more return on investment than Pacer Developed. However, Microsoft is 1.61 times more volatile than Pacer Developed Markets. It trades about 0.08 of its potential returns per unit of risk. Pacer Developed Markets is currently generating about 0.04 per unit of risk. If you would invest 24,616 in Microsoft on August 24, 2024 and sell it today you would earn a total of 17,084 from holding Microsoft or generate 69.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Pacer Developed Markets
Performance |
| Timeline |
| Microsoft |
| Pacer Developed Markets |
Microsoft and Pacer Developed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Pacer Developed
The main advantage of trading using opposite Microsoft and Pacer Developed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Pacer Developed 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 Pacer Developed will offset losses from the drop in Pacer Developed's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Pacer Developed vs. Pacer Global Cash | Pacer Developed vs. Pacer Small Cap | Pacer Developed vs. Pacer Emerging Markets | Pacer Developed vs. Pacer Cash Cows |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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