Correlation Between Microsoft and SPDR SPASX
Can any of the company-specific risk be diversified away by investing in both Microsoft and SPDR SPASX 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 SPDR SPASX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and SPDR SPASX 50, you can compare the effects of market volatilities on Microsoft and SPDR SPASX 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 SPDR SPASX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and SPDR SPASX.
Diversification Opportunities for Microsoft and SPDR SPASX
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and SPDR is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SPDR SPASX 50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SPASX 50 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 SPDR SPASX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SPASX 50 has no effect on the direction of Microsoft i.e., Microsoft and SPDR SPASX go up and down completely randomly.
Pair Corralation between Microsoft and SPDR SPASX
Given the investment horizon of 90 days Microsoft is expected to generate 1.07 times less return on investment than SPDR SPASX. In addition to that, Microsoft is 1.71 times more volatile than SPDR SPASX 50. It trades about 0.07 of its total potential returns per unit of risk. SPDR SPASX 50 is currently generating about 0.13 per unit of volatility. If you would invest 5,822 in SPDR SPASX 50 on August 26, 2024 and sell it today you would earn a total of 1,656 from holding SPDR SPASX 50 or generate 28.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.26% |
| Values | Daily Returns |
Microsoft vs. SPDR SPASX 50
Performance |
| Timeline |
| Microsoft |
| SPDR SPASX 50 |
Microsoft and SPDR SPASX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and SPDR SPASX
The main advantage of trading using opposite Microsoft and SPDR SPASX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, SPDR SPASX 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 SPDR SPASX will offset losses from the drop in SPDR SPASX's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| SPDR SPASX vs. iShares Core SP | SPDR SPASX vs. iShares CoreSP MidCap | SPDR SPASX vs. SPDR SP 500 | SPDR SPASX vs. iShares Core SP |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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