Correlation Between Microsoft and ProShares Short
Can any of the company-specific risk be diversified away by investing in both Microsoft and ProShares Short 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 ProShares Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and ProShares Short SP500, you can compare the effects of market volatilities on Microsoft and ProShares Short 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 ProShares Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and ProShares Short.
Diversification Opportunities for Microsoft and ProShares Short
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and ProShares is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and ProShares Short SP500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Short SP500 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 ProShares Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Short SP500 has no effect on the direction of Microsoft i.e., Microsoft and ProShares Short go up and down completely randomly.
Pair Corralation between Microsoft and ProShares Short
Given the investment horizon of 90 days Microsoft is expected to generate 1.72 times more return on investment than ProShares Short. However, Microsoft is 1.72 times more volatile than ProShares Short SP500. It trades about 0.06 of its potential returns per unit of risk. ProShares Short SP500 is currently generating about -0.08 per unit of risk. If you would invest 32,151 in Microsoft on August 31, 2024 and sell it today you would earn a total of 10,195 from holding Microsoft or generate 31.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. ProShares Short SP500
Performance |
| Timeline |
| Microsoft |
| ProShares Short SP500 |
Microsoft and ProShares Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and ProShares Short
The main advantage of trading using opposite Microsoft and ProShares Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, ProShares Short 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 ProShares Short will offset losses from the drop in ProShares Short's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| ProShares Short vs. ProShares Short QQQ | ProShares Short vs. ProShares Short Dow30 | ProShares Short vs. ProShares UltraShort SP500 | ProShares Short vs. ProShares Short Russell2000 |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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