Correlation Between Microsoft and Transamerica International
Can any of the company-specific risk be diversified away by investing in both Microsoft and Transamerica International 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 Transamerica International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Transamerica International Equity, you can compare the effects of market volatilities on Microsoft and Transamerica International 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 Transamerica International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Transamerica International.
Diversification Opportunities for Microsoft and Transamerica International
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Transamerica is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Transamerica International Equ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica International 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 Transamerica International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica International has no effect on the direction of Microsoft i.e., Microsoft and Transamerica International go up and down completely randomly.
Pair Corralation between Microsoft and Transamerica International
Given the investment horizon of 90 days Microsoft is expected to generate 1.39 times more return on investment than Transamerica International. However, Microsoft is 1.39 times more volatile than Transamerica International Equity. It trades about 0.19 of its potential returns per unit of risk. Transamerica International Equity is currently generating about 0.04 per unit of risk. If you would invest 40,554 in Microsoft on September 1, 2024 and sell it today you would earn a total of 1,792 from holding Microsoft or generate 4.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Microsoft vs. Transamerica International Equ
Performance |
| Timeline |
| Microsoft |
| Transamerica International |
Microsoft and Transamerica International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Transamerica International
The main advantage of trading using opposite Microsoft and Transamerica International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Transamerica International 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 Transamerica International will offset losses from the drop in Transamerica International's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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