Correlation Between Microsoft and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Microsoft and SPDR SP 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 SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and SPDR SP 600, you can compare the effects of market volatilities on Microsoft and SPDR SP 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 SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and SPDR SP.
Diversification Opportunities for Microsoft and SPDR SP
Average diversification
The 3 months correlation between Microsoft and SPDR is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SPDR SP 600 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 600 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 SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 600 has no effect on the direction of Microsoft i.e., Microsoft and SPDR SP go up and down completely randomly.
Pair Corralation between Microsoft and SPDR SP
Given the investment horizon of 90 days Microsoft is expected to under-perform the SPDR SP. In addition to that, Microsoft is 1.02 times more volatile than SPDR SP 600. It trades about -0.05 of its total potential returns per unit of risk. SPDR SP 600 is currently generating about 0.21 per unit of volatility. If you would invest 8,673 in SPDR SP 600 on August 27, 2024 and sell it today you would earn a total of 650.00 from holding SPDR SP 600 or generate 7.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. SPDR SP 600
Performance |
| Timeline |
| Microsoft |
| SPDR SP 600 |
Microsoft and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and SPDR SP
The main advantage of trading using opposite Microsoft and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, SPDR SP 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 SP will offset losses from the drop in SPDR SP's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| SPDR SP vs. Dimensional ETF Trust | SPDR SP vs. Vanguard Small Cap Index | SPDR SP vs. First Trust Multi Manager | SPDR SP vs. Vanguard SP Small Cap |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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