Correlation Between Microsoft and SPDR 500
Can any of the company-specific risk be diversified away by investing in both Microsoft and SPDR 500 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 SPDR 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and SPDR 500 LOW, you can compare the effects of market volatilities on Microsoft and SPDR 500 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 SPDR 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and SPDR 500.
Diversification Opportunities for Microsoft and SPDR 500
Modest diversification
The 3 months correlation between Microsoft and SPDR is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SPDR 500 LOW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR 500 LOW 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 SPDR 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR 500 LOW has no effect on the direction of Microsoft i.e., Microsoft and SPDR 500 go up and down completely randomly.
Pair Corralation between Microsoft and SPDR 500
Given the investment horizon of 90 days Microsoft is expected to generate 4.42 times less return on investment than SPDR 500. In addition to that, Microsoft is 1.83 times more volatile than SPDR 500 LOW. It trades about 0.02 of its total potential returns per unit of risk. SPDR 500 LOW is currently generating about 0.12 per unit of volatility. If you would invest 6,799 in SPDR 500 LOW on September 19, 2024 and sell it today you would earn a total of 765.00 from holding SPDR 500 LOW or generate 11.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.66% |
| Values | Daily Returns |
Microsoft vs. SPDR 500 LOW
Performance |
| Timeline |
| Microsoft |
| SPDR 500 LOW |
Microsoft and SPDR 500 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and SPDR 500
The main advantage of trading using opposite Microsoft and SPDR 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, SPDR 500 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 SPDR 500 will offset losses from the drop in SPDR 500's long position.| Microsoft vs. Global Blue Group | Microsoft vs. Aurora Mobile | Microsoft vs. Marqeta | Microsoft vs. Nextnav Acquisition Corp |
| SPDR 500 vs. SPDR MSCI Europe | SPDR 500 vs. SPDR MSCI Europe | SPDR 500 vs. SPDR Barclays Cap | SPDR 500 vs. SPDR SP 500 |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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