Correlation Between Microsoft and Gartner
Can any of the company-specific risk be diversified away by investing in both Microsoft and Gartner 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 Gartner into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Gartner, you can compare the effects of market volatilities on Microsoft and Gartner 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 Gartner. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Gartner.
Diversification Opportunities for Microsoft and Gartner
Poor diversification
The 3 months correlation between Microsoft and Gartner is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Gartner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gartner 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 Gartner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gartner has no effect on the direction of Microsoft i.e., Microsoft and Gartner go up and down completely randomly.
Pair Corralation between Microsoft and Gartner
Given the investment horizon of 90 days Microsoft is expected to generate 0.81 times more return on investment than Gartner. However, Microsoft is 1.24 times less risky than Gartner. It trades about -0.14 of its potential returns per unit of risk. Gartner is currently generating about -0.19 per unit of risk. If you would invest 42,165 in Microsoft on January 26, 2024 and sell it today you would lose (1,259) from holding Microsoft or give up 2.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Gartner
Performance |
| Timeline |
| Microsoft |
| Gartner |
Microsoft and Gartner Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Gartner
The main advantage of trading using opposite Microsoft and Gartner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Gartner 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 Gartner will offset losses from the drop in Gartner's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Gartner vs. CACI International | Gartner vs. CDW Corp | Gartner vs. Jack Henry Associates | Gartner vs. Broadridge Financial Solutions |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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