Correlation Between Microsoft and International Developed
Can any of the company-specific risk be diversified away by investing in both Microsoft and International Developed 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 International Developed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and International Developed Markets, you can compare the effects of market volatilities on Microsoft and International Developed 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 International Developed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and International Developed.
Diversification Opportunities for Microsoft and International Developed
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and International is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and International Developed Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Developed 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 International Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Developed has no effect on the direction of Microsoft i.e., Microsoft and International Developed go up and down completely randomly.
Pair Corralation between Microsoft and International Developed
Given the investment horizon of 90 days Microsoft is expected to under-perform the International Developed. In addition to that, Microsoft is 1.26 times more volatile than International Developed Markets. It trades about -0.21 of its total potential returns per unit of risk. International Developed Markets is currently generating about 0.07 per unit of volatility. If you would invest 4,334 in International Developed Markets on December 1, 2024 and sell it today you would earn a total of 47.00 from holding International Developed Markets or generate 1.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. International Developed Market
Performance |
| Timeline |
| Microsoft |
| International Developed |
Microsoft and International Developed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and International Developed
The main advantage of trading using opposite Microsoft and International Developed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, International Developed 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 International Developed will offset losses from the drop in International Developed's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| International Developed vs. Mirova Global Green | International Developed vs. Ab Global Real | International Developed vs. Ms Global Fixed | International Developed vs. Barings Global Floating |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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