Correlation Between Microsoft and Short Intermediate
Can any of the company-specific risk be diversified away by investing in both Microsoft and Short Intermediate 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 Short Intermediate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Short Intermediate Bond Fund, you can compare the effects of market volatilities on Microsoft and Short Intermediate 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 Short Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Short Intermediate.
Diversification Opportunities for Microsoft and Short Intermediate
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Microsoft and Short is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Short Intermediate Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Intermediate Bond 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 Short Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Intermediate Bond has no effect on the direction of Microsoft i.e., Microsoft and Short Intermediate go up and down completely randomly.
Pair Corralation between Microsoft and Short Intermediate
Given the investment horizon of 90 days Microsoft is expected to generate 9.26 times more return on investment than Short Intermediate. However, Microsoft is 9.26 times more volatile than Short Intermediate Bond Fund. It trades about 0.36 of its potential returns per unit of risk. Short Intermediate Bond Fund is currently generating about 0.15 per unit of risk. If you would invest 38,659 in Microsoft on April 24, 2025 and sell it today you would earn a total of 11,928 from holding Microsoft or generate 30.85% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Microsoft vs. Short Intermediate Bond Fund
Performance |
Timeline |
Microsoft |
Short Intermediate Bond |
Microsoft and Short Intermediate Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Short Intermediate
The main advantage of trading using opposite Microsoft and Short Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Short Intermediate 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 Short Intermediate will offset losses from the drop in Short Intermediate's long position.Microsoft vs. Palantir Technologies Class | Microsoft vs. Crowdstrike Holdings | Microsoft vs. Oracle | Microsoft vs. CoreWeave, Class A |
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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