Correlation Between Microsoft Corp and George Weston

Can any of the company-specific risk be diversified away by investing in both Microsoft Corp and George Weston 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 George Weston 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 George Weston Limited, you can compare the effects of market volatilities on Microsoft Corp and George Weston 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 George Weston. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft Corp and George Weston.

Diversification Opportunities for Microsoft Corp and George Weston

0.62

Correlation Coefficient

Microsoft Corp  George Weston

Poor diversification

The 3 months correlation between Microsoft and George is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp CDR and George Weston Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on George Weston Limited 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 George Weston. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of George Weston Limited has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and George Weston go up and down completely randomly.

Pair Corralation between Microsoft Corp and George Weston

Assuming the 90 days trading horizon Microsoft Corp is expected to generate 1.92 times less return on investment than George Weston. In addition to that, Microsoft Corp is 1.22 times more volatile than George Weston Limited. It trades about 0.01 of its total potential returns per unit of risk. George Weston Limited is currently generating about 0.03 per unit of volatility. If you would invest  22,268  in George Weston Limited on September 21, 2024 and sell it today you would earn a total of  436.00  from holding George Weston Limited or generate 1.96% 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.  George Weston Limited

Microsoft Corp CDR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft Corp CDR are ranked lower than 1 (%) 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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

George Weston Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in George Weston Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, George Weston is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Microsoft Corp and George Weston

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

The idea behind Microsoft Corp CDR and George Weston Limited 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.