Correlation Between Microsoft and Target Retirement
Can any of the company-specific risk be diversified away by investing in both Microsoft and Target Retirement 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 Target Retirement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Target Retirement 2040, you can compare the effects of market volatilities on Microsoft and Target Retirement 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 Target Retirement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Target Retirement.
Diversification Opportunities for Microsoft and Target Retirement
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Microsoft and Target is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Target Retirement 2040 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target Retirement 2040 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 Target Retirement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target Retirement 2040 has no effect on the direction of Microsoft i.e., Microsoft and Target Retirement go up and down completely randomly.
Pair Corralation between Microsoft and Target Retirement
Given the investment horizon of 90 days Microsoft is expected to generate 2.19 times more return on investment than Target Retirement. However, Microsoft is 2.19 times more volatile than Target Retirement 2040. It trades about 0.06 of its potential returns per unit of risk. Target Retirement 2040 is currently generating about 0.1 per unit of risk. If you would invest 32,151 in Microsoft on August 31, 2024 and sell it today you would earn a total of 10,195 from holding Microsoft or generate 31.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
Microsoft vs. Target Retirement 2040
Performance |
| Timeline |
| Microsoft |
| Target Retirement 2040 |
Microsoft and Target Retirement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Target Retirement
The main advantage of trading using opposite Microsoft and Target Retirement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Target Retirement 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 Target Retirement will offset losses from the drop in Target Retirement's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Target Retirement vs. Ms Global Fixed | Target Retirement vs. Multisector Bond Sma | Target Retirement vs. Calamos Dynamic Convertible | Target Retirement vs. Ab Bond Inflation |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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