Correlation Between SPDR Barclays and Microsoft
Can any of the company-specific risk be diversified away by investing in both SPDR Barclays 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 SPDR Barclays and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Barclays Intermediate and Microsoft, you can compare the effects of market volatilities on SPDR Barclays 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 SPDR Barclays with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Barclays and Microsoft.
Diversification Opportunities for SPDR Barclays and Microsoft
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between SPDR and Microsoft is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Barclays Intermediate and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and SPDR Barclays 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 SPDR Barclays Intermediate 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 SPDR Barclays i.e., SPDR Barclays and Microsoft go up and down completely randomly.
Pair Corralation between SPDR Barclays and Microsoft
Given the investment horizon of 90 days SPDR Barclays Intermediate is expected to generate 0.28 times more return on investment than Microsoft. However, SPDR Barclays Intermediate is 3.58 times less risky than Microsoft. It trades about -0.22 of its potential returns per unit of risk. Microsoft is currently generating about -0.24 per unit of risk. If you would invest 3,248 in SPDR Barclays Intermediate on January 20, 2024 and sell it today you would lose (42.00) from holding SPDR Barclays Intermediate or give up 1.29% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 95.45% |
Values | Daily Returns |
SPDR Barclays Intermediate vs. Microsoft
Performance |
Timeline |
SPDR Barclays Interm |
Microsoft |
SPDR Barclays and Microsoft Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with SPDR Barclays and Microsoft
The main advantage of trading using opposite SPDR Barclays and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Barclays 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.SPDR Barclays vs. SPDR Barclays Short | SPDR Barclays vs. SPDR Bloomberg Emerging | SPDR Barclays vs. SPDR Barclays Long | SPDR Barclays vs. SPDR Barclays Short |
Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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