Correlation Between Microsoft and Midcap Fund
Can any of the company-specific risk be diversified away by investing in both Microsoft and Midcap Fund 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 Midcap Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Midcap Fund Class, you can compare the effects of market volatilities on Microsoft and Midcap Fund 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 Midcap Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Midcap Fund.
Diversification Opportunities for Microsoft and Midcap Fund
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Midcap is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Midcap Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Fund Class 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 Midcap Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Fund Class has no effect on the direction of Microsoft i.e., Microsoft and Midcap Fund go up and down completely randomly.
Pair Corralation between Microsoft and Midcap Fund
Given the investment horizon of 90 days Microsoft is expected to under-perform the Midcap Fund. In addition to that, Microsoft is 1.61 times more volatile than Midcap Fund Class. It trades about -0.06 of its total potential returns per unit of risk. Midcap Fund Class is currently generating about 0.2 per unit of volatility. If you would invest 3,654 in Midcap Fund Class on August 26, 2024 and sell it today you would earn a total of 170.00 from holding Midcap Fund Class or generate 4.65% 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. Midcap Fund Class
Performance |
| Timeline |
| Microsoft |
| Midcap Fund Class |
Microsoft and Midcap Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Midcap Fund
The main advantage of trading using opposite Microsoft and Midcap Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Midcap Fund 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 Midcap Fund will offset losses from the drop in Midcap Fund's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Rapid7 Inc |
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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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