Correlation Between Microsoft and Fundo Investec
Can any of the company-specific risk be diversified away by investing in both Microsoft and Fundo Investec 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 Fundo Investec into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Fundo Investec IMB, you can compare the effects of market volatilities on Microsoft and Fundo Investec 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 Fundo Investec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Fundo Investec.
Diversification Opportunities for Microsoft and Fundo Investec
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Fundo is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Fundo Investec IMB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fundo Investec IMB 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 Fundo Investec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fundo Investec IMB has no effect on the direction of Microsoft i.e., Microsoft and Fundo Investec go up and down completely randomly.
Pair Corralation between Microsoft and Fundo Investec
Given the investment horizon of 90 days Microsoft is expected to generate 0.52 times more return on investment than Fundo Investec. However, Microsoft is 1.91 times less risky than Fundo Investec. It trades about 0.16 of its potential returns per unit of risk. Fundo Investec IMB is currently generating about -0.11 per unit of risk. If you would invest 41,879 in Microsoft on September 24, 2024 and sell it today you would earn a total of 1,646 from holding Microsoft or generate 3.93% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Microsoft vs. Fundo Investec IMB
Performance |
Timeline |
Microsoft |
Fundo Investec IMB |
Microsoft and Fundo Investec Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Fundo Investec
The main advantage of trading using opposite Microsoft and Fundo Investec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Fundo Investec 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 Fundo Investec will offset losses from the drop in Fundo Investec's long position.Microsoft vs. BlackBerry | Microsoft vs. Global Blue Group | Microsoft vs. Aurora Mobile | Microsoft vs. Marqeta |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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