Correlation Between Microsoft Corp and Vaneck Retail

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

Diversification Opportunities for Microsoft Corp and Vaneck Retail

  Correlation Coefficient

Poor diversification

The 3 months correlation between Microsoft and Vaneck is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp and Vaneck Retail ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vaneck Retail ETF and Microsoft Corp 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 Corp are associated (or correlated) with Vaneck Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vaneck Retail ETF has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and Vaneck Retail go up and down completely randomly.

Pair Corralation between Microsoft Corp and Vaneck Retail

Given the investment horizon of 90 days Microsoft Corp is expected to under-perform the Vaneck Retail. In addition to that, Microsoft Corp is 1.3 times more volatile than Vaneck Retail ETF. It trades about -0.06 of its total potential returns per unit of risk. Vaneck Retail ETF is currently generating about -0.04 per unit of volatility. If you would invest  18,649  in Vaneck Retail ETF on June 26, 2022 and sell it today you would lose (3,055)  from holding Vaneck Retail ETF or give up 16.38% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

Microsoft Corp  vs.  Vaneck Retail ETF

 Performance (%) 
Microsoft Corp 
Microsoft Performance
0 of 100
Over the last 90 days Microsoft Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Microsoft Price Channel

Vaneck Retail ETF 
Vaneck Performance
0 of 100
Over the last 90 days Vaneck Retail ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Vaneck Retail is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Vaneck Price Channel

Microsoft Corp and Vaneck Retail Volatility Contrast

   Predicted Return Density   

Pair Trading with Microsoft Corp and Vaneck Retail

The main advantage of trading using opposite Microsoft Corp and Vaneck Retail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft Corp position performs unexpectedly, Vaneck Retail 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 Vaneck Retail will offset losses from the drop in Vaneck Retail's long position.
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The idea behind Microsoft Corp and Vaneck Retail ETF 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.
Vaneck Retail vs. Caterpillar
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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