Correlation Between Microsoft and Strategic Bond
Can any of the company-specific risk be diversified away by investing in both Microsoft and Strategic Bond 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 Strategic Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Strategic Bond Fund, you can compare the effects of market volatilities on Microsoft and Strategic Bond 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 Strategic Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Strategic Bond.
Diversification Opportunities for Microsoft and Strategic Bond
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Strategic is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Strategic Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Bond 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 Strategic Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Bond has no effect on the direction of Microsoft i.e., Microsoft and Strategic Bond go up and down completely randomly.
Pair Corralation between Microsoft and Strategic Bond
Given the investment horizon of 90 days Microsoft is expected to generate 3.41 times more return on investment than Strategic Bond. However, Microsoft is 3.41 times more volatile than Strategic Bond Fund. It trades about 0.07 of its potential returns per unit of risk. Strategic Bond Fund is currently generating about 0.02 per unit of risk. If you would invest 24,994 in Microsoft on December 1, 2024 and sell it today you would earn a total of 14,705 from holding Microsoft or generate 58.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Microsoft vs. Strategic Bond Fund
Performance |
| Timeline |
| Microsoft |
| Strategic Bond |
Microsoft and Strategic Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Strategic Bond
The main advantage of trading using opposite Microsoft and Strategic Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Strategic Bond 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 Strategic Bond will offset losses from the drop in Strategic Bond's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| Strategic Bond vs. International Developed Markets | Strategic Bond vs. Global Real Estate | Strategic Bond vs. Global Real Estate | Strategic Bond vs. Global Real Estate |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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