Correlation Between Microsoft and 3I Group
Can any of the company-specific risk be diversified away by investing in both Microsoft and 3I Group 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 3I Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and 3I Group PLC, you can compare the effects of market volatilities on Microsoft and 3I Group 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 3I Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and 3I Group.
Diversification Opportunities for Microsoft and 3I Group
Very weak diversification
The 3 months correlation between Microsoft and III is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and 3I Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3I Group PLC 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 3I Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3I Group PLC has no effect on the direction of Microsoft i.e., Microsoft and 3I Group go up and down completely randomly.
Pair Corralation between Microsoft and 3I Group
Given the investment horizon of 90 days Microsoft is expected to under-perform the 3I Group. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.15 times less risky than 3I Group. The stock trades about -0.01 of its potential returns per unit of risk. The 3I Group PLC is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 306,336 in 3I Group PLC on September 24, 2024 and sell it today you would earn a total of 48,464 from holding 3I Group PLC or generate 15.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.22% |
| Values | Daily Returns |
Microsoft vs. 3I Group PLC
Performance |
| Timeline |
| Microsoft |
| 3I Group PLC |
Microsoft and 3I Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and 3I Group
The main advantage of trading using opposite Microsoft and 3I Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, 3I Group 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 3I Group will offset losses from the drop in 3I Group's long position.| Microsoft vs. BlackBerry | Microsoft vs. Global Blue Group | Microsoft vs. Aurora Mobile | Microsoft vs. Marqeta |
| 3I Group vs. Darden Restaurants | 3I Group vs. New Residential Investment | 3I Group vs. Kinnevik Investment AB | 3I Group vs. Scandinavian Tobacco Group |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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