Correlation Between Microsoft and Gold Bullion
Can any of the company-specific risk be diversified away by investing in both Microsoft and Gold Bullion 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 Gold Bullion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Gold Bullion Securities, you can compare the effects of market volatilities on Microsoft and Gold Bullion 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 Gold Bullion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Gold Bullion.
Diversification Opportunities for Microsoft and Gold Bullion
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Gold is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Gold Bullion Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Bullion Securities 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 Gold Bullion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Bullion Securities has no effect on the direction of Microsoft i.e., Microsoft and Gold Bullion go up and down completely randomly.
Pair Corralation between Microsoft and Gold Bullion
Given the investment horizon of 90 days Microsoft is expected to generate 1.57 times more return on investment than Gold Bullion. However, Microsoft is 1.57 times more volatile than Gold Bullion Securities. It trades about 0.05 of its potential returns per unit of risk. Gold Bullion Securities is currently generating about -0.01 per unit of risk. If you would invest 42,375 in Microsoft on September 23, 2024 and sell it today you would earn a total of 1,285 from holding Microsoft or generate 3.03% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 97.73% |
Values | Daily Returns |
Microsoft vs. Gold Bullion Securities
Performance |
Timeline |
Microsoft |
Gold Bullion Securities |
Microsoft and Gold Bullion Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Gold Bullion
The main advantage of trading using opposite Microsoft and Gold Bullion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Gold Bullion 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 Gold Bullion will offset losses from the drop in Gold Bullion's long position.Microsoft vs. BlackBerry | Microsoft vs. Global Blue Group | Microsoft vs. Aurora Mobile | Microsoft vs. Marqeta |
Gold Bullion vs. Ally Financial | Gold Bullion vs. Air Products Chemicals | Gold Bullion vs. Games Workshop Group | Gold Bullion vs. Discover Financial Services |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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