Correlation Between Microsoft and Baron Global

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

By analyzing existing cross correlation between Microsoft and Baron Global Advantage, you can compare the effects of market volatilities on Microsoft and Baron Global 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 Baron Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Baron Global.

Diversification Opportunities for Microsoft and Baron Global

0.16

Correlation Coefficient

Microsoft  Baron Global

Average diversification

The 3 months correlation between Microsoft and Baron is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Baron Global Advantage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Global Advantage 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 Baron Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Global Advantage has no effect on the direction of Microsoft i.e., Microsoft and Baron Global go up and down completely randomly.

Pair Corralation between Microsoft and Baron Global

Given the investment horizon of 90 days Microsoft is expected to generate 7.64 times less return on investment than Baron Global. In addition to that, Microsoft is 1.02 times more volatile than Baron Global Advantage. It trades about 0.02 of its total potential returns per unit of risk. Baron Global Advantage is currently generating about 0.15 per unit of volatility. If you would invest  3,213  in Baron Global Advantage on September 3, 2024 and sell it today you would earn a total of  795.00  from holding Baron Global Advantage or generate 24.74% return on investment over 90 days.

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

Microsoft  vs.  Baron Global Advantage

Microsoft

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Baron Global Advantage

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Global Advantage are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Baron Global showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Baron Global

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

The idea behind Microsoft and Baron Global Advantage 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.

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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.