Correlation Between Microsoft and Western Asset
Can any of the company-specific risk be diversified away by investing in both Microsoft and Western Asset 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 Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Western Asset Managed, you can compare the effects of market volatilities on Microsoft and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Western Asset.
Diversification Opportunities for Microsoft and Western Asset
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Western is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Western Asset Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Managed 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Managed has no effect on the direction of Microsoft i.e., Microsoft and Western Asset go up and down completely randomly.
Pair Corralation between Microsoft and Western Asset
Given the investment horizon of 90 days Microsoft is expected to generate 6.04 times more return on investment than Western Asset. However, Microsoft is 6.04 times more volatile than Western Asset Managed. It trades about 0.08 of its potential returns per unit of risk. Western Asset Managed is currently generating about 0.07 per unit of risk. If you would invest 24,042 in Microsoft on August 28, 2024 and sell it today you would earn a total of 17,837 from holding Microsoft or generate 74.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Western Asset Managed
Performance |
| Timeline |
| Microsoft |
| Western Asset Managed |
Microsoft and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Western Asset
The main advantage of trading using opposite Microsoft and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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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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