Correlation Between Microsoft and GigCapital7 Corp

Can any of the company-specific risk be diversified away by investing in both Microsoft and GigCapital7 Corp 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 GigCapital7 Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and GigCapital7 Corp Class, you can compare the effects of market volatilities on Microsoft and GigCapital7 Corp 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 GigCapital7 Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and GigCapital7 Corp.

Diversification Opportunities for Microsoft and GigCapital7 Corp

0.72

Correlation Coefficient

Microsoft  GigCapital7 Corp

Poor diversification

The 3 months correlation between Microsoft and GigCapital7 is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and GigCapital7 Corp Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigCapital7 Corp Class 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 GigCapital7 Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GigCapital7 Corp Class has no effect on the direction of Microsoft i.e., Microsoft and GigCapital7 Corp go up and down completely randomly.

Pair Corralation between Microsoft and GigCapital7 Corp

Given the investment horizon of 90 days Microsoft is expected to generate 0.07 times more return on investment than GigCapital7 Corp. However, Microsoft is 14.19 times less risky than GigCapital7 Corp. It trades about 0.1 of its potential returns per unit of risk. GigCapital7 Corp Class is currently generating about -0.21 per unit of risk. If you would invest  42,799  in Microsoft on September 27, 2024 and sell it today you would earn a total of  1,012  from holding Microsoft or generate 2.36% return on investment over 90 days.

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

Microsoft  vs.  GigCapital7 Corp Class

Microsoft

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 2 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

GigCapital7 Corp Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GigCapital7 Corp Class has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Microsoft and GigCapital7 Corp

The main advantage of trading using opposite Microsoft and GigCapital7 Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, GigCapital7 Corp 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 GigCapital7 Corp will offset losses from the drop in GigCapital7 Corp's long position.

The idea behind Microsoft and GigCapital7 Corp Class 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.