Correlation Between Microsoft and Tax Exempt
Can any of the company-specific risk be diversified away by investing in both Microsoft and Tax Exempt 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 Tax Exempt into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Tax Exempt Bond Fund, you can compare the effects of market volatilities on Microsoft and Tax Exempt 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 Tax Exempt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Tax Exempt.
Diversification Opportunities for Microsoft and Tax Exempt
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Tax is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Tax Exempt Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Exempt 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 Tax Exempt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Exempt Bond has no effect on the direction of Microsoft i.e., Microsoft and Tax Exempt go up and down completely randomly.
Pair Corralation between Microsoft and Tax Exempt
Given the investment horizon of 90 days Microsoft is expected to generate 5.2 times more return on investment than Tax Exempt. However, Microsoft is 5.2 times more volatile than Tax Exempt Bond Fund. It trades about 0.19 of its potential returns per unit of risk. Tax Exempt Bond Fund is currently generating about 0.25 per unit of risk. If you would invest 40,554 in Microsoft on September 1, 2024 and sell it today you would earn a total of 1,792 from holding Microsoft or generate 4.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Tax Exempt Bond Fund
Performance |
| Timeline |
| Microsoft |
| Tax Exempt Bond |
Microsoft and Tax Exempt Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Tax Exempt
The main advantage of trading using opposite Microsoft and Tax Exempt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Tax Exempt 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 Tax Exempt will offset losses from the drop in Tax Exempt's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Tax Exempt vs. International Developed Markets | Tax Exempt vs. Global Real Estate | Tax Exempt vs. Global Real Estate | Tax Exempt 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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