Correlation Between Microsoft and Growth Income
Can any of the company-specific risk be diversified away by investing in both Microsoft and Growth Income 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 Growth Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Growth Income Fund, you can compare the effects of market volatilities on Microsoft and Growth Income 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 Growth Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Growth Income.
Diversification Opportunities for Microsoft and Growth Income
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Growth is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Growth Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Income 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 Growth Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Income has no effect on the direction of Microsoft i.e., Microsoft and Growth Income go up and down completely randomly.
Pair Corralation between Microsoft and Growth Income
Given the investment horizon of 90 days Microsoft is expected to under-perform the Growth Income. In addition to that, Microsoft is 1.92 times more volatile than Growth Income Fund. It trades about -0.04 of its total potential returns per unit of risk. Growth Income Fund is currently generating about 0.22 per unit of volatility. If you would invest 3,348 in Growth Income Fund on August 28, 2024 and sell it today you would earn a total of 138.00 from holding Growth Income Fund or generate 4.12% 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. Growth Income Fund
Performance |
| Timeline |
| Microsoft |
| Growth Income |
Microsoft and Growth Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Growth Income
The main advantage of trading using opposite Microsoft and Growth Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Growth Income 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 Growth Income will offset losses from the drop in Growth Income's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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