Correlation Between Microsoft and Invesco Physical

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

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

Diversification Opportunities for Microsoft and Invesco Physical

0.07

Correlation Coefficient

Microsoft  Invesco Physical

Significant diversification

The 3 months correlation between Microsoft and Invesco is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Invesco Physical Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Physical Gold 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 Invesco Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Physical Gold has no effect on the direction of Microsoft i.e., Microsoft and Invesco Physical go up and down completely randomly.

Pair Corralation between Microsoft and Invesco Physical

Given the investment horizon of 90 days Microsoft is expected to generate 3.97 times less return on investment than Invesco Physical. In addition to that, Microsoft is 1.46 times more volatile than Invesco Physical Gold. It trades about 0.02 of its total potential returns per unit of risk. Invesco Physical Gold is currently generating about 0.1 per unit of volatility. If you would invest  1,900,050  in Invesco Physical Gold on September 23, 2024 and sell it today you would earn a total of  110,500  from holding Invesco Physical Gold or generate 5.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

Microsoft  vs.  Invesco Physical Gold

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.

Invesco Physical Gold

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Physical Gold are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Invesco Physical is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Microsoft and Invesco Physical

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

The idea behind Microsoft and Invesco Physical Gold 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.