Correlation Between Microsoft and UGI
Can any of the company-specific risk be diversified away by investing in both Microsoft and UGI 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 UGI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and UGI Corporation, you can compare the effects of market volatilities on Microsoft and UGI 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 UGI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and UGI.
Diversification Opportunities for Microsoft and UGI
Average diversification
The 3 months correlation between Microsoft and UGI is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and UGI Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UGI Corporation 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 UGI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UGI Corporation has no effect on the direction of Microsoft i.e., Microsoft and UGI go up and down completely randomly.
Pair Corralation between Microsoft and UGI
Given the investment horizon of 90 days Microsoft is expected to under-perform the UGI. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.08 times less risky than UGI. The stock trades about -0.04 of its potential returns per unit of risk. The UGI Corporation is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 2,495 in UGI Corporation on August 27, 2024 and sell it today you would earn a total of 438.00 from holding UGI Corporation or generate 17.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. UGI Corp.
Performance |
| Timeline |
| Microsoft |
| UGI Corporation |
Microsoft and UGI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and UGI
The main advantage of trading using opposite Microsoft and UGI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, UGI 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 UGI will offset losses from the drop in UGI's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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