Correlation Between Microsoft and Xtrackers ESG
Can any of the company-specific risk be diversified away by investing in both Microsoft and Xtrackers ESG 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 Xtrackers ESG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Xtrackers ESG USD, you can compare the effects of market volatilities on Microsoft and Xtrackers ESG 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 Xtrackers ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Xtrackers ESG.
Diversification Opportunities for Microsoft and Xtrackers ESG
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Xtrackers is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Xtrackers ESG USD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers ESG USD 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 Xtrackers ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers ESG USD has no effect on the direction of Microsoft i.e., Microsoft and Xtrackers ESG go up and down completely randomly.
Pair Corralation between Microsoft and Xtrackers ESG
Given the investment horizon of 90 days Microsoft is expected to generate 4.44 times more return on investment than Xtrackers ESG. However, Microsoft is 4.44 times more volatile than Xtrackers ESG USD. It trades about 0.03 of its potential returns per unit of risk. Xtrackers ESG USD is currently generating about 0.11 per unit of risk. If you would invest 40,668 in Microsoft on October 24, 2024 and sell it today you would earn a total of 3,497 from holding Microsoft or generate 8.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.2% |
| Values | Daily Returns |
Microsoft vs. Xtrackers ESG USD
Performance |
| Timeline |
| Microsoft |
| Xtrackers ESG USD |
Microsoft and Xtrackers ESG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Xtrackers ESG
The main advantage of trading using opposite Microsoft and Xtrackers ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Xtrackers ESG 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 Xtrackers ESG will offset losses from the drop in Xtrackers ESG's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. BLOCK INC | Microsoft vs. Adobe Systems Incorporated |
| Xtrackers ESG vs. Xtrackers MSCI | Xtrackers ESG vs. Xtrackers FTSE 250 | Xtrackers ESG vs. Xtrackers Ie Plc | Xtrackers ESG vs. Xtrackers Russell 2000 |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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