Correlation Between Microsoft and Great Elm
Can any of the company-specific risk be diversified away by investing in both Microsoft and Great Elm 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 Great Elm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Great Elm Capital, you can compare the effects of market volatilities on Microsoft and Great Elm 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 Great Elm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Great Elm.
Diversification Opportunities for Microsoft and Great Elm
Average diversification
The 3 months correlation between Microsoft and Great is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Great Elm Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Elm Capital 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 Great Elm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Elm Capital has no effect on the direction of Microsoft i.e., Microsoft and Great Elm go up and down completely randomly.
Pair Corralation between Microsoft and Great Elm
If you would invest 41,493 in Microsoft on September 18, 2024 and sell it today you would earn a total of 3,666 from holding Microsoft or generate 8.84% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 5.0% |
Values | Daily Returns |
Microsoft vs. Great Elm Capital
Performance |
Timeline |
Microsoft |
Great Elm Capital |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Microsoft and Great Elm Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Great Elm
The main advantage of trading using opposite Microsoft and Great Elm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Great Elm 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 Great Elm will offset losses from the drop in Great Elm's long position.Microsoft vs. Global Blue Group | Microsoft vs. Aurora Mobile | Microsoft vs. Marqeta | Microsoft vs. Nextnav Acquisition Corp |
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.
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