Correlation Between Microsoft and Intermediate Term
Can any of the company-specific risk be diversified away by investing in both Microsoft and Intermediate Term 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 Intermediate Term into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Intermediate Term Bond Fund, you can compare the effects of market volatilities on Microsoft and Intermediate Term 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 Intermediate Term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Intermediate Term.
Diversification Opportunities for Microsoft and Intermediate Term
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Intermediate is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Intermediate Term Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermediate Term Bond 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 Intermediate Term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intermediate Term Bond has no effect on the direction of Microsoft i.e., Microsoft and Intermediate Term go up and down completely randomly.
Pair Corralation between Microsoft and Intermediate Term
Given the investment horizon of 90 days Microsoft is expected to generate 3.78 times more return on investment than Intermediate Term. However, Microsoft is 3.78 times more volatile than Intermediate Term Bond Fund. It trades about 0.08 of its potential returns per unit of risk. Intermediate Term Bond Fund is currently generating about 0.05 per unit of risk. If you would invest 24,341 in Microsoft on August 29, 2024 and sell it today you would earn a total of 17,958 from holding Microsoft or generate 73.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Intermediate Term Bond Fund
Performance |
| Timeline |
| Microsoft |
| Intermediate Term Bond |
Microsoft and Intermediate Term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Intermediate Term
The main advantage of trading using opposite Microsoft and Intermediate Term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Intermediate Term 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 Intermediate Term will offset losses from the drop in Intermediate Term's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Intermediate Term vs. Prudential Government Income | Intermediate Term vs. Virtus Seix Government | Intermediate Term vs. Dreyfus Government Cash | Intermediate Term vs. Us Government Securities |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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