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
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and Vanguard is 0.47. 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 generate 10.05 times less return on investment than Vanguard World. In addition to that, Microsoft is 1.08 times more volatile than Vanguard World. It trades about 0.02 of its total potential returns per unit of risk. Vanguard World is currently generating about 0.16 per unit of volatility. If you would invest 433,526 in Vanguard World on August 28, 2024 and sell it today you would earn a total of 111,474 from holding Vanguard World or generate 25.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| 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. 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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