Correlation Between Microsoft and Guggenheim World
Can any of the company-specific risk be diversified away by investing in both Microsoft and Guggenheim 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 Guggenheim World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Guggenheim World Equity, you can compare the effects of market volatilities on Microsoft and Guggenheim 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 Guggenheim World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Guggenheim World.
Diversification Opportunities for Microsoft and Guggenheim World
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and Guggenheim is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Guggenheim World Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guggenheim World Equity 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 Guggenheim World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guggenheim World Equity has no effect on the direction of Microsoft i.e., Microsoft and Guggenheim World go up and down completely randomly.
Pair Corralation between Microsoft and Guggenheim World
Given the investment horizon of 90 days Microsoft is expected to under-perform the Guggenheim World. In addition to that, Microsoft is 3.32 times more volatile than Guggenheim World Equity. It trades about -0.04 of its total potential returns per unit of risk. Guggenheim World Equity is currently generating about 0.21 per unit of volatility. If you would invest 1,745 in Guggenheim World Equity on August 30, 2024 and sell it today you would earn a total of 44.00 from holding Guggenheim World Equity or generate 2.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Guggenheim World Equity
Performance |
| Timeline |
| Microsoft |
| Guggenheim World Equity |
Microsoft and Guggenheim World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Guggenheim World
The main advantage of trading using opposite Microsoft and Guggenheim World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Guggenheim 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 Guggenheim World will offset losses from the drop in Guggenheim World's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Guggenheim World vs. Vanguard Financials Index | Guggenheim World vs. Angel Oak Financial | Guggenheim World vs. Hennessy Large Cap | Guggenheim World vs. Davis Financial Fund |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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