Correlation Between Microsoft and SSgA SPDR
Can any of the company-specific risk be diversified away by investing in both Microsoft and SSgA SPDR 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 SSgA SPDR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and SSgA SPDR ETFs, you can compare the effects of market volatilities on Microsoft and SSgA SPDR 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 SSgA SPDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and SSgA SPDR.
Diversification Opportunities for Microsoft and SSgA SPDR
Significant diversification
The 3 months correlation between Microsoft and SSgA is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SSgA SPDR ETFs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSgA SPDR ETFs 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 SSgA SPDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSgA SPDR ETFs has no effect on the direction of Microsoft i.e., Microsoft and SSgA SPDR go up and down completely randomly.
Pair Corralation between Microsoft and SSgA SPDR
Given the investment horizon of 90 days Microsoft is expected to generate 0.87 times more return on investment than SSgA SPDR. However, Microsoft is 1.15 times less risky than SSgA SPDR. It trades about 0.08 of its potential returns per unit of risk. SSgA SPDR ETFs is currently generating about 0.05 per unit of risk. If you would invest 25,277 in Microsoft on September 3, 2024 and sell it today you would earn a total of 17,069 from holding Microsoft or generate 67.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 57.58% |
| Values | Daily Returns |
Microsoft vs. SSgA SPDR ETFs
Performance |
| Timeline |
| Microsoft |
| SSgA SPDR ETFs |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Microsoft and SSgA SPDR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and SSgA SPDR
The main advantage of trading using opposite Microsoft and SSgA SPDR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, SSgA SPDR 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 SSgA SPDR will offset losses from the drop in SSgA SPDR's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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