Correlation Between Microsoft and Invesco Health
Can any of the company-specific risk be diversified away by investing in both Microsoft and Invesco Health 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 Invesco Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Invesco Health Care, you can compare the effects of market volatilities on Microsoft and Invesco Health 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 Invesco Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Invesco Health.
Diversification Opportunities for Microsoft and Invesco Health
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Invesco is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Invesco Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Health Care 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 Invesco Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Health Care has no effect on the direction of Microsoft i.e., Microsoft and Invesco Health go up and down completely randomly.
Pair Corralation between Microsoft and Invesco Health
Given the investment horizon of 90 days Microsoft is expected to generate 1.85 times more return on investment than Invesco Health. However, Microsoft is 1.85 times more volatile than Invesco Health Care. It trades about 0.04 of its potential returns per unit of risk. Invesco Health Care is currently generating about 0.04 per unit of risk. If you would invest 37,325 in Microsoft on August 25, 2024 and sell it today you would earn a total of 4,375 from holding Microsoft or generate 11.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.13% |
| Values | Daily Returns |
Microsoft vs. Invesco Health Care
Performance |
| Timeline |
| Microsoft |
| Invesco Health Care |
Microsoft and Invesco Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Invesco Health
The main advantage of trading using opposite Microsoft and Invesco Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Invesco Health 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 Invesco Health will offset losses from the drop in Invesco Health's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Invesco Health vs. Invesco MSCI Emerging | Invesco Health vs. Invesco EURO STOXX | Invesco Health vs. Invesco Markets Plc | Invesco Health vs. Invesco FTSE RAFI |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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