Correlation Between Microsoft and VANGUARD INTERMEDIATE-TER

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

Diversification Opportunities for Microsoft and VANGUARD INTERMEDIATE-TER

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between Microsoft and VANGUARD is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and VANGUARD INTERMEDIATE-TERM TAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VANGUARD INTERMEDIATE-TER 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 VANGUARD INTERMEDIATE-TER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VANGUARD INTERMEDIATE-TER has no effect on the direction of Microsoft i.e., Microsoft and VANGUARD INTERMEDIATE-TER go up and down completely randomly.

Pair Corralation between Microsoft and VANGUARD INTERMEDIATE-TER

Given the investment horizon of 90 days Microsoft is expected to under-perform the VANGUARD INTERMEDIATE-TER. In addition to that, Microsoft is 9.89 times more volatile than VANGUARD INTERMEDIATE-TERM TAX-EXEMPT. It trades about -0.03 of its total potential returns per unit of risk. VANGUARD INTERMEDIATE-TERM TAX-EXEMPT is currently generating about 0.1 per unit of volatility. If you would invest  1,325  in VANGUARD INTERMEDIATE-TERM TAX-EXEMPT on September 10, 2022 and sell it today you would earn a total of  21.00  from holding VANGUARD INTERMEDIATE-TERM TAX-EXEMPT or generate 1.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.44%
ValuesDaily Returns

Microsoft  vs.  VANGUARD INTERMEDIATE-TERM TAX

 Performance (%) 
       Timeline  
Microsoft 
Microsoft Performance
0 of 100
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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Microsoft Price Channel

VANGUARD INTERMEDIATE-TER 
VANGUARD Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in VANGUARD INTERMEDIATE-TERM TAX-EXEMPT are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, VANGUARD INTERMEDIATE-TER is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

VANGUARD Price Channel

Microsoft and VANGUARD INTERMEDIATE-TER Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Microsoft and VANGUARD INTERMEDIATE-TER

The main advantage of trading using opposite Microsoft and VANGUARD INTERMEDIATE-TER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, VANGUARD INTERMEDIATE-TER 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 VANGUARD INTERMEDIATE-TER will offset losses from the drop in VANGUARD INTERMEDIATE-TER's long position.
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The idea behind Microsoft and VANGUARD INTERMEDIATE-TERM TAX-EXEMPT 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.
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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 Price Transformation module to use Price Transformation models to analyze depth of different equity instruments across global markets.

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