Correlation Between Microsoft and Gillette India

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

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

Diversification Opportunities for Microsoft and Gillette India

0.23

Correlation Coefficient

Microsoft  Gillette India

Modest diversification

The 3 months correlation between Microsoft and Gillette is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Gillette India Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gillette India 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 Gillette India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gillette India has no effect on the direction of Microsoft i.e., Microsoft and Gillette India go up and down completely randomly.

Pair Corralation between Microsoft and Gillette India

Given the investment horizon of 90 days Microsoft is expected to generate 6.29 times less return on investment than Gillette India. But when comparing it to its historical volatility, Microsoft is 2.01 times less risky than Gillette India. It trades about 0.02 of its potential returns per unit of risk. Gillette India Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  877,916  in Gillette India Limited on September 23, 2024 and sell it today you would earn a total of  63,524  from holding Gillette India Limited or generate 7.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Microsoft  vs.  Gillette India Limited

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) 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.

Gillette India

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gillette India Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Gillette India may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Microsoft and Gillette India

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

The idea behind Microsoft and Gillette India Limited 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 Transaction History module to view history of all your transactions and understand their impact on performance.