Correlation Between Microsoft and New World
Can any of the company-specific risk be diversified away by investing in both Microsoft and New World 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 New World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and New World Fund, you can compare the effects of market volatilities on Microsoft and New World 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 New World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and New World.
Diversification Opportunities for Microsoft and New World
Modest diversification
The 3 months correlation between Microsoft and New is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and New World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New World Fund 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 New World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New World Fund has no effect on the direction of Microsoft i.e., Microsoft and New World go up and down completely randomly.
Pair Corralation between Microsoft and New World
Given the investment horizon of 90 days Microsoft is expected to generate 2.65 times more return on investment than New World. However, Microsoft is 2.65 times more volatile than New World Fund. It trades about -0.04 of its potential returns per unit of risk. New World Fund is currently generating about -0.18 per unit of risk. If you would invest 43,167 in Microsoft on August 31, 2024 and sell it today you would lose (868.00) from holding Microsoft or give up 2.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. New World Fund
Performance |
| Timeline |
| Microsoft |
| New World Fund |
Microsoft and New World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and New World
The main advantage of trading using opposite Microsoft and New World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, New World 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 New World will offset losses from the drop in New World's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| New World vs. Pear Tree Polaris | New World vs. Artisan High Income | New World vs. HUMANA INC | New World vs. Aquagold International |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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