Correlation Between Microsoft and SPDR Galaxy
Can any of the company-specific risk be diversified away by investing in both Microsoft and SPDR Galaxy 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 SPDR Galaxy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and SPDR Galaxy Transformative, you can compare the effects of market volatilities on Microsoft and SPDR Galaxy 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 SPDR Galaxy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and SPDR Galaxy.
Diversification Opportunities for Microsoft and SPDR Galaxy
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and SPDR is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SPDR Galaxy Transformative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Galaxy Transfor 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 SPDR Galaxy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Galaxy Transfor has no effect on the direction of Microsoft i.e., Microsoft and SPDR Galaxy go up and down completely randomly.
Pair Corralation between Microsoft and SPDR Galaxy
Given the investment horizon of 90 days Microsoft is expected to under-perform the SPDR Galaxy. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.67 times less risky than SPDR Galaxy. The stock trades about 0.0 of its potential returns per unit of risk. The SPDR Galaxy Transformative is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3,225 in SPDR Galaxy Transformative on August 29, 2024 and sell it today you would earn a total of 83.00 from holding SPDR Galaxy Transformative or generate 2.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. SPDR Galaxy Transformative
Performance |
| Timeline |
| Microsoft |
| SPDR Galaxy Transfor |
Microsoft and SPDR Galaxy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and SPDR Galaxy
The main advantage of trading using opposite Microsoft and SPDR Galaxy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, SPDR Galaxy 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 SPDR Galaxy will offset losses from the drop in SPDR Galaxy'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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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