Correlation Between Microsoft and Virtus International
Can any of the company-specific risk be diversified away by investing in both Microsoft and Virtus International 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 Virtus International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Virtus International Small Cap, you can compare the effects of market volatilities on Microsoft and Virtus International 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 Virtus International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Virtus International.
Diversification Opportunities for Microsoft and Virtus International
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Microsoft and Virtus is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Virtus International Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus International 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 Virtus International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus International has no effect on the direction of Microsoft i.e., Microsoft and Virtus International go up and down completely randomly.
Pair Corralation between Microsoft and Virtus International
Given the investment horizon of 90 days Microsoft is expected to generate 2.39 times more return on investment than Virtus International. However, Microsoft is 2.39 times more volatile than Virtus International Small Cap. It trades about 0.02 of its potential returns per unit of risk. Virtus International Small Cap is currently generating about -0.26 per unit of risk. If you would invest 42,574 in Microsoft on August 29, 2024 and sell it today you would earn a total of 225.00 from holding Microsoft or generate 0.53% 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. Virtus International Small Cap
Performance |
| Timeline |
| Microsoft |
| Virtus International |
Microsoft and Virtus International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Virtus International
The main advantage of trading using opposite Microsoft and Virtus International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Virtus International 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 Virtus International will offset losses from the drop in Virtus International's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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