Correlation Between Microsoft and Floating Rate
Can any of the company-specific risk be diversified away by investing in both Microsoft and Floating Rate 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 Floating Rate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Floating Rate Fund, you can compare the effects of market volatilities on Microsoft and Floating Rate 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 Floating Rate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Floating Rate.
Diversification Opportunities for Microsoft and Floating Rate
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Floating is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Floating Rate Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Floating Rate 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 Floating Rate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Floating Rate has no effect on the direction of Microsoft i.e., Microsoft and Floating Rate go up and down completely randomly.
Pair Corralation between Microsoft and Floating Rate
Given the investment horizon of 90 days Microsoft is expected to generate 8.29 times more return on investment than Floating Rate. However, Microsoft is 8.29 times more volatile than Floating Rate Fund. It trades about 0.02 of its potential returns per unit of risk. Floating Rate Fund is currently generating about 0.16 per unit of risk. If you would invest 41,449 in Microsoft on September 2, 2024 and sell it today you would earn a total of 897.00 from holding Microsoft or generate 2.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Floating Rate Fund
Performance |
| Timeline |
| Microsoft |
| Floating Rate |
Microsoft and Floating Rate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Floating Rate
The main advantage of trading using opposite Microsoft and Floating Rate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Floating Rate 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 Floating Rate will offset losses from the drop in Floating Rate's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Floating Rate vs. Growth Strategy Fund | Floating Rate vs. Black Oak Emerging | Floating Rate vs. Investec Emerging Markets | Floating Rate vs. Shelton Emerging Markets |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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