Correlation Between Microsoft and Global Advantage
Can any of the company-specific risk be diversified away by investing in both Microsoft and Global Advantage 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 Global Advantage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Global Advantage Portfolio, you can compare the effects of market volatilities on Microsoft and Global Advantage 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 Global Advantage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Global Advantage.
Diversification Opportunities for Microsoft and Global Advantage
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Global is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Global Advantage Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Advantage Por 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 Global Advantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Advantage Por has no effect on the direction of Microsoft i.e., Microsoft and Global Advantage go up and down completely randomly.
Pair Corralation between Microsoft and Global Advantage
Given the investment horizon of 90 days Microsoft is expected to under-perform the Global Advantage. In addition to that, Microsoft is 1.47 times more volatile than Global Advantage Portfolio. It trades about -0.04 of its total potential returns per unit of risk. Global Advantage Portfolio is currently generating about 0.24 per unit of volatility. If you would invest 1,432 in Global Advantage Portfolio on November 9, 2024 and sell it today you would earn a total of 97.00 from holding Global Advantage Portfolio or generate 6.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Global Advantage Portfolio
Performance |
| Timeline |
| Microsoft |
| Global Advantage Por |
Microsoft and Global Advantage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Global Advantage
The main advantage of trading using opposite Microsoft and Global Advantage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Global Advantage 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 Global Advantage will offset losses from the drop in Global Advantage's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| Global Advantage vs. Global Advantage Portfolio | Global Advantage vs. Global Advantage Portfolio | Global Advantage vs. Ridgeworth Innovative Growth | Global Advantage vs. Transamerica Capital Growth |
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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