Correlation Between Microsoft and Moderate Balanced
Can any of the company-specific risk be diversified away by investing in both Microsoft and Moderate Balanced 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 Moderate Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Moderate Balanced Allocation, you can compare the effects of market volatilities on Microsoft and Moderate Balanced 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 Moderate Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Moderate Balanced.
Diversification Opportunities for Microsoft and Moderate Balanced
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Microsoft and Moderate is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Moderate Balanced Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderate Balanced 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 Moderate Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderate Balanced has no effect on the direction of Microsoft i.e., Microsoft and Moderate Balanced go up and down completely randomly.
Pair Corralation between Microsoft and Moderate Balanced
Given the investment horizon of 90 days Microsoft is expected to generate 2.26 times more return on investment than Moderate Balanced. However, Microsoft is 2.26 times more volatile than Moderate Balanced Allocation. It trades about 0.16 of its potential returns per unit of risk. Moderate Balanced Allocation is currently generating about 0.23 per unit of risk. If you would invest 46,121 in Microsoft on May 31, 2025 and sell it today you would earn a total of 4,548 from holding Microsoft or generate 9.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Moderate Balanced Allocation
Performance |
| Timeline |
| Microsoft |
| Moderate Balanced |
Microsoft and Moderate Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Moderate Balanced
The main advantage of trading using opposite Microsoft and Moderate Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Moderate Balanced 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 Moderate Balanced will offset losses from the drop in Moderate Balanced's long position.| Microsoft vs. Palantir Technologies Class | Microsoft vs. Crowdstrike Holdings | Microsoft vs. Oracle | Microsoft vs. CoreWeave, Class A |
| Moderate Balanced vs. Salient Alternative Beta | Moderate Balanced vs. Aggressive Balanced Allocation | Moderate Balanced vs. Salient Alternative Beta | Moderate Balanced vs. Moderately Aggressive Balanced |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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