Correlation Between Microsoft and Global Strategy
Can any of the company-specific risk be diversified away by investing in both Microsoft and Global Strategy 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 Global Strategy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Global Strategy Fund, you can compare the effects of market volatilities on Microsoft and Global Strategy 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 Global Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Global Strategy.
Diversification Opportunities for Microsoft and Global Strategy
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and Global is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Global Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Strategy 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 Global Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Strategy has no effect on the direction of Microsoft i.e., Microsoft and Global Strategy go up and down completely randomly.
Pair Corralation between Microsoft and Global Strategy
Given the investment horizon of 90 days Microsoft is expected to generate 3.05 times more return on investment than Global Strategy. However, Microsoft is 3.05 times more volatile than Global Strategy Fund. It trades about 0.05 of its potential returns per unit of risk. Global Strategy Fund is currently generating about 0.13 per unit of risk. If you would invest 40,862 in Microsoft on September 2, 2024 and sell it today you would earn a total of 1,484 from holding Microsoft or generate 3.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Global Strategy Fund
Performance |
| Timeline |
| Microsoft |
| Global Strategy |
Microsoft and Global Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Global Strategy
The main advantage of trading using opposite Microsoft and Global Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Global Strategy 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 Global Strategy will offset losses from the drop in Global Strategy's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Global Strategy vs. Mid Cap Index | Global Strategy vs. Mid Cap Strategic | Global Strategy vs. Valic Company I | Global Strategy vs. Valic Company I |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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