Correlation Between Microsoft and TPG
Can any of the company-specific risk be diversified away by investing in both Microsoft and TPG 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 TPG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and TPG Inc, you can compare the effects of market volatilities on Microsoft and TPG 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 TPG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and TPG.
Diversification Opportunities for Microsoft and TPG
Modest diversification
The 3 months correlation between Microsoft and TPG is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and TPG Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPG Inc 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 TPG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPG Inc has no effect on the direction of Microsoft i.e., Microsoft and TPG go up and down completely randomly.
Pair Corralation between Microsoft and TPG
Given the investment horizon of 90 days Microsoft is expected to under-perform the TPG. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.93 times less risky than TPG. The stock trades about -0.04 of its potential returns per unit of risk. The TPG Inc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 6,805 in TPG Inc on August 30, 2024 and sell it today you would earn a total of 176.00 from holding TPG Inc or generate 2.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. TPG Inc
Performance |
| Timeline |
| Microsoft |
| TPG Inc |
Microsoft and TPG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and TPG
The main advantage of trading using opposite Microsoft and TPG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, TPG 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 TPG will offset losses from the drop in TPG's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| TPG vs. Ares Management LP | TPG vs. Patria Investments | TPG vs. Apollo Global Management | TPG vs. Cion Investment Corp |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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