Correlation Between Microsoft and Massmutual Retiresmart
Can any of the company-specific risk be diversified away by investing in both Microsoft and Massmutual Retiresmart 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 Massmutual Retiresmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Massmutual Retiresmart 2035, you can compare the effects of market volatilities on Microsoft and Massmutual Retiresmart 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 Massmutual Retiresmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Massmutual Retiresmart.
Diversification Opportunities for Microsoft and Massmutual Retiresmart
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and Massmutual is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Massmutual Retiresmart 2035 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Massmutual Retiresmart 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 Massmutual Retiresmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Massmutual Retiresmart has no effect on the direction of Microsoft i.e., Microsoft and Massmutual Retiresmart go up and down completely randomly.
Pair Corralation between Microsoft and Massmutual Retiresmart
Given the investment horizon of 90 days Microsoft is expected to generate 2.07 times less return on investment than Massmutual Retiresmart. In addition to that, Microsoft is 2.35 times more volatile than Massmutual Retiresmart 2035. It trades about 0.02 of its total potential returns per unit of risk. Massmutual Retiresmart 2035 is currently generating about 0.11 per unit of volatility. If you would invest 1,133 in Massmutual Retiresmart 2035 on August 30, 2024 and sell it today you would earn a total of 87.00 from holding Massmutual Retiresmart 2035 or generate 7.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Massmutual Retiresmart 2035
Performance |
| Timeline |
| Microsoft |
| Massmutual Retiresmart |
Microsoft and Massmutual Retiresmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Massmutual Retiresmart
The main advantage of trading using opposite Microsoft and Massmutual Retiresmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Massmutual Retiresmart 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 Massmutual Retiresmart will offset losses from the drop in Massmutual Retiresmart's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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