Correlation Between Microsoft and PIMCO Short
Can any of the company-specific risk be diversified away by investing in both Microsoft and PIMCO Short 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 PIMCO Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and PIMCO Short Term High, you can compare the effects of market volatilities on Microsoft and PIMCO Short 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 PIMCO Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and PIMCO Short.
Diversification Opportunities for Microsoft and PIMCO Short
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and PIMCO is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and PIMCO Short Term High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Short Term 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 PIMCO Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Short Term has no effect on the direction of Microsoft i.e., Microsoft and PIMCO Short go up and down completely randomly.
Pair Corralation between Microsoft and PIMCO Short
Given the investment horizon of 90 days Microsoft is expected to generate 6.47 times more return on investment than PIMCO Short. However, Microsoft is 6.47 times more volatile than PIMCO Short Term High. It trades about 0.07 of its potential returns per unit of risk. PIMCO Short Term High is currently generating about 0.16 per unit of risk. If you would invest 42,615 in Microsoft on September 12, 2024 and sell it today you would earn a total of 2,284 from holding Microsoft or generate 5.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. PIMCO Short Term High
Performance |
| Timeline |
| Microsoft |
| PIMCO Short Term |
Microsoft and PIMCO Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and PIMCO Short
The main advantage of trading using opposite Microsoft and PIMCO Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, PIMCO Short 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 PIMCO Short will offset losses from the drop in PIMCO Short's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| PIMCO Short vs. PIMCO Dollar Short | PIMCO Short vs. PIMCO Low Duration | PIMCO Short vs. PIMCO ETFs plc | PIMCO Short vs. PIMCO Short Term High |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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