Correlation Between Microsoft and Gamco Investors

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

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

Diversification Opportunities for Microsoft and Gamco Investors

-0.38

Correlation Coefficient

Microsoft  Gamco Investors

Very good diversification

The 3 months correlation between Microsoft and Gamco is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Gamco Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamco Investors 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 Gamco Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamco Investors has no effect on the direction of Microsoft i.e., Microsoft and Gamco Investors go up and down completely randomly.

Pair Corralation between Microsoft and Gamco Investors

If you would invest  42,944  in Microsoft on September 30, 2024 and sell it today you would earn a total of  109.00  from holding Microsoft or generate 0.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Microsoft  vs.  Gamco Investors

Microsoft

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Gamco Investors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gamco Investors has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Gamco Investors is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Microsoft and Gamco Investors

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

The idea behind Microsoft and Gamco Investors 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.