Correlation Between Microsoft and BetaShares Dollar
Can any of the company-specific risk be diversified away by investing in both Microsoft and BetaShares Dollar 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 BetaShares Dollar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and BetaShares Dollar ETF, you can compare the effects of market volatilities on Microsoft and BetaShares Dollar 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 BetaShares Dollar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and BetaShares Dollar.
Diversification Opportunities for Microsoft and BetaShares Dollar
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and BetaShares is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and BetaShares Dollar ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaShares Dollar ETF 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 BetaShares Dollar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaShares Dollar ETF has no effect on the direction of Microsoft i.e., Microsoft and BetaShares Dollar go up and down completely randomly.
Pair Corralation between Microsoft and BetaShares Dollar
Given the investment horizon of 90 days Microsoft is expected to generate 1.8 times more return on investment than BetaShares Dollar. However, Microsoft is 1.8 times more volatile than BetaShares Dollar ETF. It trades about 0.15 of its potential returns per unit of risk. BetaShares Dollar ETF is currently generating about 0.1 per unit of risk. If you would invest 40,955 in Microsoft on September 2, 2024 and sell it today you would earn a total of 1,391 from holding Microsoft or generate 3.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Microsoft vs. BetaShares Dollar ETF
Performance |
| Timeline |
| Microsoft |
| BetaShares Dollar ETF |
Microsoft and BetaShares Dollar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and BetaShares Dollar
The main advantage of trading using opposite Microsoft and BetaShares Dollar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, BetaShares Dollar 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 BetaShares Dollar will offset losses from the drop in BetaShares Dollar'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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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