Correlation Between Microsoft and Vanguard World
Can any of the company-specific risk be diversified away by investing in both Microsoft and Vanguard World 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 World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Vanguard World, you can compare the effects of market volatilities on Microsoft and Vanguard World 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 World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Vanguard World.
Diversification Opportunities for Microsoft and Vanguard World
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and Vanguard is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Vanguard World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard World 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 World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard World has no effect on the direction of Microsoft i.e., Microsoft and Vanguard World go up and down completely randomly.
Pair Corralation between Microsoft and Vanguard World
Given the investment horizon of 90 days Microsoft is expected to under-perform the Vanguard World. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.1 times less risky than Vanguard World. The stock trades about -0.07 of its potential returns per unit of risk. The Vanguard World is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,283,500 in Vanguard World on October 24, 2024 and sell it today you would earn a total of 24,000 from holding Vanguard World or generate 1.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 90.0% |
| Values | Daily Returns |
Microsoft vs. Vanguard World
Performance |
| Timeline |
| Microsoft |
| Vanguard World |
Microsoft and Vanguard World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Vanguard World
The main advantage of trading using opposite Microsoft and Vanguard World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Vanguard World 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 World will offset losses from the drop in Vanguard World's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. BLOCK INC | Microsoft vs. Adobe Systems Incorporated |
| Vanguard World vs. Vanguard Funds Public | Vanguard World vs. Vanguard Specialized Funds | Vanguard World vs. Vanguard World | Vanguard World vs. Vanguard Index Funds |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
Other Complementary Tools
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes |