Correlation Between DGAZ and Microsoft
Can any of the company-specific risk be diversified away by investing in both DGAZ 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 DGAZ and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DGAZ and Microsoft, you can compare the effects of market volatilities on DGAZ 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 DGAZ with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of DGAZ and Microsoft.
Diversification Opportunities for DGAZ and Microsoft
Pay attention - limited upside
The 3 months correlation between DGAZ and Microsoft is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding DGAZ and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and DGAZ 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 DGAZ 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 DGAZ i.e., DGAZ and Microsoft go up and down completely randomly.
Pair Corralation between DGAZ and Microsoft
If you would invest (100.00) in DGAZ on January 16, 2024 and sell it today you would earn a total of 100.00 from holding DGAZ or generate -100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 0.0% |
| Values | Daily Returns |
DGAZ vs. Microsoft
Performance |
| Timeline |
| DGAZ |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Microsoft |
DGAZ and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DGAZ and Microsoft
The main advantage of trading using opposite DGAZ and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DGAZ 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 DGAZ 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.| Microsoft vs. Cloudflare | Microsoft vs. Okta Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Nutanix |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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