Correlation Between Microsoft and Select Fund
Can any of the company-specific risk be diversified away by investing in both Microsoft and Select Fund 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 Select Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Select Fund I, you can compare the effects of market volatilities on Microsoft and Select Fund 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 Select Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Select Fund.
Diversification Opportunities for Microsoft and Select Fund
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Select is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Select Fund I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Fund I 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 Select Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Fund I has no effect on the direction of Microsoft i.e., Microsoft and Select Fund go up and down completely randomly.
Pair Corralation between Microsoft and Select Fund
Given the investment horizon of 90 days Microsoft is expected to under-perform the Select Fund. In addition to that, Microsoft is 1.57 times more volatile than Select Fund I. It trades about -0.04 of its total potential returns per unit of risk. Select Fund I is currently generating about 0.07 per unit of volatility. If you would invest 12,776 in Select Fund I on August 31, 2024 and sell it today you would earn a total of 218.00 from holding Select Fund I or generate 1.71% 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. Select Fund I
Performance |
| Timeline |
| Microsoft |
| Select Fund I |
Microsoft and Select Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Select Fund
The main advantage of trading using opposite Microsoft and Select Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Select Fund 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 Select Fund will offset losses from the drop in Select Fund's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Select Fund vs. Europacific Growth Fund | Select Fund vs. Washington Mutual Investors | Select Fund vs. Capital World Growth | Select Fund vs. HUMANA INC |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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