Correlation Between MARKET VECTR and Microsoft
Can any of the company-specific risk be diversified away by investing in both MARKET VECTR and Microsoft 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 MARKET VECTR and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MARKET VECTR RETAIL and Microsoft, you can compare the effects of market volatilities on MARKET VECTR and Microsoft 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 MARKET VECTR with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of MARKET VECTR and Microsoft.
Diversification Opportunities for MARKET VECTR and Microsoft
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MARKET and Microsoft is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding MARKET VECTR RETAIL and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and MARKET VECTR 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 MARKET VECTR RETAIL are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of MARKET VECTR i.e., MARKET VECTR and Microsoft go up and down completely randomly.
Pair Corralation between MARKET VECTR and Microsoft
Assuming the 90 days trading horizon MARKET VECTR is expected to generate 1.57 times less return on investment than Microsoft. But when comparing it to its historical volatility, MARKET VECTR RETAIL is 1.72 times less risky than Microsoft. It trades about 0.11 of its potential returns per unit of risk. Microsoft is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 22,093 in Microsoft on September 12, 2024 and sell it today you would earn a total of 20,172 from holding Microsoft or generate 91.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.4% |
| Values | Daily Returns |
MARKET VECTR RETAIL vs. Microsoft
Performance |
| Timeline |
| MARKET VECTR RETAIL |
| Microsoft |
MARKET VECTR and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MARKET VECTR and Microsoft
The main advantage of trading using opposite MARKET VECTR and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MARKET VECTR position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.| MARKET VECTR vs. Apple Inc | MARKET VECTR vs. Apple Inc | MARKET VECTR vs. Apple Inc | MARKET VECTR vs. Apple Inc |
| Microsoft vs. Consolidated Communications Holdings | Microsoft vs. MAROC TELECOM | Microsoft vs. EAT WELL INVESTMENT | Microsoft vs. MGIC INVESTMENT |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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