Correlation Between Microsoft and VanEck Semiconductor
Can any of the company-specific risk be diversified away by investing in both Microsoft and VanEck Semiconductor 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 VanEck Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and VanEck Semiconductor ETF, you can compare the effects of market volatilities on Microsoft and VanEck Semiconductor 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 VanEck Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and VanEck Semiconductor.
Diversification Opportunities for Microsoft and VanEck Semiconductor
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and VanEck is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and VanEck Semiconductor ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Semiconductor ETF 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 VanEck Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Semiconductor ETF has no effect on the direction of Microsoft i.e., Microsoft and VanEck Semiconductor go up and down completely randomly.
Pair Corralation between Microsoft and VanEck Semiconductor
Given the investment horizon of 90 days Microsoft is expected to generate 0.81 times more return on investment than VanEck Semiconductor. However, Microsoft is 1.23 times less risky than VanEck Semiconductor. It trades about 0.01 of its potential returns per unit of risk. VanEck Semiconductor ETF is currently generating about -0.03 per unit of risk. If you would invest 42,717 in Microsoft on August 28, 2024 and sell it today you would earn a total of 82.00 from holding Microsoft or generate 0.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. VanEck Semiconductor ETF
Performance |
| Timeline |
| Microsoft |
| VanEck Semiconductor ETF |
Microsoft and VanEck Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and VanEck Semiconductor
The main advantage of trading using opposite Microsoft and VanEck Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, VanEck Semiconductor 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 VanEck Semiconductor will offset losses from the drop in VanEck Semiconductor's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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