Correlation Between Microsoft Corp and Guardian Capital

Can any of the company-specific risk be diversified away by investing in both Microsoft Corp and Guardian Capital 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 Corp and Guardian Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft Corp CDR and Guardian Capital Group, you can compare the effects of market volatilities on Microsoft Corp and Guardian Capital 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 Corp with a short position of Guardian Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft Corp and Guardian Capital.

Diversification Opportunities for Microsoft Corp and Guardian Capital

0.73

Correlation Coefficient

Microsoft Corp  Guardian Capital

Poor diversification

The 3 months correlation between Microsoft and Guardian is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp CDR and Guardian Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardian Capital and Microsoft Corp 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 Corp CDR are associated (or correlated) with Guardian Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardian Capital has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and Guardian Capital go up and down completely randomly.

Pair Corralation between Microsoft Corp and Guardian Capital

Assuming the 90 days trading horizon Microsoft Corp CDR is expected to generate 0.9 times more return on investment than Guardian Capital. However, Microsoft Corp CDR is 1.12 times less risky than Guardian Capital. It trades about 0.08 of its potential returns per unit of risk. Guardian Capital Group is currently generating about 0.03 per unit of risk. If you would invest  1,944  in Microsoft Corp CDR on October 1, 2024 and sell it today you would earn a total of  1,204  from holding Microsoft Corp CDR or generate 61.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Microsoft Corp CDR  vs.  Guardian Capital Group

Microsoft Corp CDR

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft Corp CDR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Microsoft Corp is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Guardian Capital

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guardian Capital Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Guardian Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Microsoft Corp and Guardian Capital

The main advantage of trading using opposite Microsoft Corp and Guardian Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft Corp position performs unexpectedly, Guardian Capital 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 Guardian Capital will offset losses from the drop in Guardian Capital's long position.

The idea behind Microsoft Corp CDR and Guardian Capital Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.