Correlation Between Microsoft and Vanguard Consumer
Can any of the company-specific risk be diversified away by investing in both Microsoft and Vanguard Consumer 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 Vanguard Consumer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Vanguard Consumer Discretionary, you can compare the effects of market volatilities on Microsoft and Vanguard Consumer 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 Vanguard Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Vanguard Consumer.
Diversification Opportunities for Microsoft and Vanguard Consumer
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Vanguard is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Vanguard Consumer Discretionar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Consumer 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 Vanguard Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Consumer has no effect on the direction of Microsoft i.e., Microsoft and Vanguard Consumer go up and down completely randomly.
Pair Corralation between Microsoft and Vanguard Consumer
Given the investment horizon of 90 days Microsoft is expected to generate 1.2 times more return on investment than Vanguard Consumer. However, Microsoft is 1.2 times more volatile than Vanguard Consumer Discretionary. It trades about 0.08 of its potential returns per unit of risk. Vanguard Consumer Discretionary is currently generating about 0.08 per unit of risk. If you would invest 24,116 in Microsoft on August 27, 2024 and sell it today you would earn a total of 17,584 from holding Microsoft or generate 72.91% 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. Vanguard Consumer Discretionar
Performance |
| Timeline |
| Microsoft |
| Vanguard Consumer |
Microsoft and Vanguard Consumer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Vanguard Consumer
The main advantage of trading using opposite Microsoft and Vanguard Consumer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Vanguard Consumer 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 Vanguard Consumer will offset losses from the drop in Vanguard Consumer'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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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