Correlation Between Microsoft and Payden Global
Can any of the company-specific risk be diversified away by investing in both Microsoft and Payden Global 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 Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Payden Global Fixed, you can compare the effects of market volatilities on Microsoft and Payden Global 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 Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Payden Global.
Diversification Opportunities for Microsoft and Payden Global
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and Payden is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Payden Global Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Global Fixed 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 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Global Fixed has no effect on the direction of Microsoft i.e., Microsoft and Payden Global go up and down completely randomly.
Pair Corralation between Microsoft and Payden Global
Given the investment horizon of 90 days Microsoft is expected to generate 4.92 times more return on investment than Payden Global. However, Microsoft is 4.92 times more volatile than Payden Global Fixed. It trades about 0.1 of its potential returns per unit of risk. Payden Global Fixed is currently generating about 0.07 per unit of risk. If you would invest 22,345 in Microsoft on August 31, 2024 and sell it today you would earn a total of 20,001 from holding Microsoft or generate 89.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Microsoft vs. Payden Global Fixed
Performance |
| Timeline |
| Microsoft |
| Payden Global Fixed |
Microsoft and Payden Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Payden Global
The main advantage of trading using opposite Microsoft and Payden Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Payden Global 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 Global will offset losses from the drop in Payden Global's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Payden Global vs. Payden Corporate Bond | Payden Global vs. Payden Floating Rate | Payden Global vs. Payden Absolute Return | Payden Global vs. Payden California Municipal |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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