Correlation Between Microsoft and Gan Shmuel

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Can any of the company-specific risk be diversified away by investing in both Microsoft and Gan Shmuel 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 Gan Shmuel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Gan Shmuel, you can compare the effects of market volatilities on Microsoft and Gan Shmuel 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 Gan Shmuel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Gan Shmuel.

Diversification Opportunities for Microsoft and Gan Shmuel

-0.31
  Correlation Coefficient

Very good diversification

The 3 months correlation between Microsoft and Gan is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Gan Shmuel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gan Shmuel 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 Gan Shmuel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gan Shmuel has no effect on the direction of Microsoft i.e., Microsoft and Gan Shmuel go up and down completely randomly.

Pair Corralation between Microsoft and Gan Shmuel

Given the investment horizon of 90 days Microsoft is expected to generate 136.56 times less return on investment than Gan Shmuel. But when comparing it to its historical volatility, Microsoft is 3.13 times less risky than Gan Shmuel. It trades about 0.01 of its potential returns per unit of risk. Gan Shmuel is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  146,107  in Gan Shmuel on February 12, 2024 and sell it today you would earn a total of  111,893  from holding Gan Shmuel or generate 76.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy76.56%
ValuesDaily Returns

Microsoft  vs.  Gan Shmuel

 Performance 
       Timeline  
Microsoft 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.
Gan Shmuel 

Risk-Adjusted Performance

24 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Gan Shmuel are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gan Shmuel sustained solid returns over the last few months and may actually be approaching a breakup point.

Microsoft and Gan Shmuel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Microsoft and Gan Shmuel

The main advantage of trading using opposite Microsoft and Gan Shmuel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Gan Shmuel 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 Gan Shmuel will offset losses from the drop in Gan Shmuel's long position.
The idea behind Microsoft and Gan Shmuel 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.
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 Transaction History module to view history of all your transactions and understand their impact on performance.

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