Correlation Between G2D Investments and Microsoft

Can any of the company-specific risk be diversified away by investing in both G2D Investments and Microsoft 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 G2D Investments and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between G2D Investments and Microsoft, you can compare the effects of market volatilities on G2D Investments and Microsoft 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 G2D Investments with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of G2D Investments and Microsoft.

Diversification Opportunities for G2D Investments and Microsoft

0.26

Correlation Coefficient

G2D Investments  Microsoft

Modest diversification

The 3 months correlation between G2D and Microsoft is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding G2D Investments and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and G2D Investments 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 G2D Investments are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of G2D Investments i.e., G2D Investments and Microsoft go up and down completely randomly.

Pair Corralation between G2D Investments and Microsoft

Assuming the 90 days trading horizon G2D Investments is expected to generate 1.86 times less return on investment than Microsoft. In addition to that, G2D Investments is 1.95 times more volatile than Microsoft. It trades about 0.09 of its total potential returns per unit of risk. Microsoft is currently generating about 0.34 per unit of volatility. If you would invest  9,133  in Microsoft on April 24, 2025 and sell it today you would earn a total of  2,646  from holding Microsoft or generate 28.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

G2D Investments  vs.  Microsoft

G2D Investments

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in G2D Investments are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, G2D Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

Microsoft

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Microsoft sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with G2D Investments and Microsoft

The main advantage of trading using opposite G2D Investments and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G2D Investments position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.

The idea behind G2D Investments and Microsoft 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.