Correlation Between Microsoft and Payden Floating
Can any of the company-specific risk be diversified away by investing in both Microsoft and Payden Floating 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 Payden Floating into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Payden Floating Rate, you can compare the effects of market volatilities on Microsoft and Payden Floating 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 Payden Floating. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Payden Floating.
Diversification Opportunities for Microsoft and Payden Floating
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Payden is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Payden Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden 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 Payden Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Floating Rate has no effect on the direction of Microsoft i.e., Microsoft and Payden Floating go up and down completely randomly.
Pair Corralation between Microsoft and Payden Floating
Given the investment horizon of 90 days Microsoft is expected to generate 13.54 times more return on investment than Payden Floating. However, Microsoft is 13.54 times more volatile than Payden Floating Rate. It trades about 0.02 of its potential returns per unit of risk. Payden Floating Rate is currently generating about 0.29 per unit of risk. If you would invest 41,195 in Microsoft on September 1, 2024 and sell it today you would earn a total of 1,151 from holding Microsoft or generate 2.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Microsoft vs. Payden Floating Rate
Performance |
| Timeline |
| Microsoft |
| Payden Floating Rate |
Microsoft and Payden Floating Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Payden Floating
The main advantage of trading using opposite Microsoft and Payden Floating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Payden Floating 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 Payden Floating will offset losses from the drop in Payden Floating's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Payden Floating vs. Vanguard Total Stock | Payden Floating vs. Vanguard 500 Index | Payden Floating vs. Vanguard Total Stock | Payden Floating vs. Vanguard Total Stock |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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