Correlation Between Microsoft and Short Duration
Can any of the company-specific risk be diversified away by investing in both Microsoft and Short Duration 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 Short Duration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Short Duration Income, you can compare the effects of market volatilities on Microsoft and Short Duration 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 Short Duration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Short Duration.
Diversification Opportunities for Microsoft and Short Duration
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and SHORT is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Short Duration Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Duration Income 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 Short Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Duration Income has no effect on the direction of Microsoft i.e., Microsoft and Short Duration go up and down completely randomly.
Pair Corralation between Microsoft and Short Duration
Given the investment horizon of 90 days Microsoft is expected to generate 11.18 times more return on investment than Short Duration. However, Microsoft is 11.18 times more volatile than Short Duration Income. It trades about 0.08 of its potential returns per unit of risk. Short Duration Income is currently generating about 0.17 per unit of risk. If you would invest 24,341 in Microsoft on August 29, 2024 and sell it today you would earn a total of 17,958 from holding Microsoft or generate 73.78% 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. Short Duration Income
Performance |
| Timeline |
| Microsoft |
| Short Duration Income |
Microsoft and Short Duration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Short Duration
The main advantage of trading using opposite Microsoft and Short Duration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Short Duration 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 Short Duration will offset losses from the drop in Short Duration's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Short Duration vs. Short Duration Income | Short Duration vs. Doubleline Total Return | Short Duration vs. Janus Short Term Bond | Short Duration vs. Ab Sustainable Thematic |
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 CEOs Directory module to screen CEOs from public companies around the world.
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