Correlation Between Global X and Microsoft
Can any of the company-specific risk be diversified away by investing in both Global X 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 Global X and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X Funds and Microsoft, you can compare the effects of market volatilities on Global X 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 Global X with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and Microsoft.
Diversification Opportunities for Global X and Microsoft
Poor diversification
The 3 months correlation between Global and Microsoft is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Global X Funds and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Global X 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 Global X Funds 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 Global X i.e., Global X and Microsoft go up and down completely randomly.
Pair Corralation between Global X and Microsoft
Considering the 90-day investment horizon Global X Funds is expected to generate 0.78 times more return on investment than Microsoft. However, Global X Funds is 1.28 times less risky than Microsoft. It trades about -0.2 of its potential returns per unit of risk. Microsoft is currently generating about -0.24 per unit of risk. If you would invest 2,601 in Global X Funds on January 20, 2024 and sell it today you would lose (86.00) from holding Global X Funds or give up 3.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Global X Funds vs. Microsoft
Performance |
| Timeline |
| Global X Funds |
| Microsoft |
Global X and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global X and Microsoft
The main advantage of trading using opposite Global X and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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.| Global X vs. Desktop Metal | Global X vs. Fabrinet | Global X vs. Kimball Electronics | Global X vs. Knowles Cor |
| Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings | Microsoft vs. Cloudflare |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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