Correlation Between Microsoft and Guggenheim Small
Can any of the company-specific risk be diversified away by investing in both Microsoft and Guggenheim Small 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 Guggenheim Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Guggenheim Small Cap, you can compare the effects of market volatilities on Microsoft and Guggenheim Small 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 Guggenheim Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Guggenheim Small.
Diversification Opportunities for Microsoft and Guggenheim Small
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Guggenheim is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Guggenheim Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guggenheim Small Cap 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 Guggenheim Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guggenheim Small Cap has no effect on the direction of Microsoft i.e., Microsoft and Guggenheim Small go up and down completely randomly.
Pair Corralation between Microsoft and Guggenheim Small
Given the investment horizon of 90 days Microsoft is expected to generate 1.25 times more return on investment than Guggenheim Small. However, Microsoft is 1.25 times more volatile than Guggenheim Small Cap. It trades about 0.06 of its potential returns per unit of risk. Guggenheim Small Cap is currently generating about 0.06 per unit of risk. If you would invest 37,464 in Microsoft on September 14, 2024 and sell it today you would earn a total of 7,263 from holding Microsoft or generate 19.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 86.25% |
| Values | Daily Returns |
Microsoft vs. Guggenheim Small Cap
Performance |
| Timeline |
| Microsoft |
| Guggenheim Small Cap |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Microsoft and Guggenheim Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Guggenheim Small
The main advantage of trading using opposite Microsoft and Guggenheim Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Guggenheim Small 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 Guggenheim Small will offset losses from the drop in Guggenheim Small's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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