Correlation Between Microsoft and SPDR MSCI
Can any of the company-specific risk be diversified away by investing in both Microsoft and SPDR MSCI 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 SPDR MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and SPDR MSCI World, you can compare the effects of market volatilities on Microsoft and SPDR MSCI 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 SPDR MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and SPDR MSCI.
Diversification Opportunities for Microsoft and SPDR MSCI
Good diversification
The 3 months correlation between Microsoft and SPDR is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SPDR MSCI World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI 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 SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI World has no effect on the direction of Microsoft i.e., Microsoft and SPDR MSCI go up and down completely randomly.
Pair Corralation between Microsoft and SPDR MSCI
Given the investment horizon of 90 days Microsoft is expected to generate 1.99 times more return on investment than SPDR MSCI. However, Microsoft is 1.99 times more volatile than SPDR MSCI World. It trades about 0.06 of its potential returns per unit of risk. SPDR MSCI World is currently generating about 0.06 per unit of risk. If you would invest 32,151 in Microsoft on August 31, 2024 and sell it today you would earn a total of 10,195 from holding Microsoft or generate 31.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.16% |
| Values | Daily Returns |
Microsoft vs. SPDR MSCI World
Performance |
| Timeline |
| Microsoft |
| SPDR MSCI World |
Microsoft and SPDR MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and SPDR MSCI
The main advantage of trading using opposite Microsoft and SPDR MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, SPDR MSCI 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 SPDR MSCI will offset losses from the drop in SPDR MSCI's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| SPDR MSCI vs. iShares Core MSCI | SPDR MSCI vs. BlackRock ESG Multi Asset | SPDR MSCI vs. Pershing Square Holdings | SPDR MSCI vs. ASML Holding NV |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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