Correlation Between Microsoft Corp and Pentagon I

Can any of the company-specific risk be diversified away by investing in both Microsoft Corp and Pentagon I 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 Pentagon I into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft Corp CDR and Pentagon I Capital, you can compare the effects of market volatilities on Microsoft Corp and Pentagon I 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 Pentagon I. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft Corp and Pentagon I.

Diversification Opportunities for Microsoft Corp and Pentagon I

-0.75

Correlation Coefficient

Microsoft Corp  Pentagon I

Pay attention - limited upside

The 3 months correlation between Microsoft and Pentagon is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp CDR and Pentagon I Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentagon I Capital 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 CDR are associated (or correlated) with Pentagon I. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentagon I Capital has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and Pentagon I go up and down completely randomly.

Pair Corralation between Microsoft Corp and Pentagon I

Assuming the 90 days trading horizon Microsoft Corp CDR is expected to generate 0.15 times more return on investment than Pentagon I. However, Microsoft Corp CDR is 6.46 times less risky than Pentagon I. It trades about 0.01 of its potential returns per unit of risk. Pentagon I Capital is currently generating about -0.1 per unit of risk. If you would invest  3,173  in Microsoft Corp CDR on September 23, 2024 and sell it today you would earn a total of  17.00  from holding Microsoft Corp CDR or generate 0.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Microsoft Corp CDR  vs.  Pentagon I Capital

Microsoft Corp CDR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft Corp CDR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Microsoft Corp is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pentagon I Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pentagon I Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Microsoft Corp and Pentagon I

The main advantage of trading using opposite Microsoft Corp and Pentagon I positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft Corp position performs unexpectedly, Pentagon I 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 Pentagon I will offset losses from the drop in Pentagon I's long position.

The idea behind Microsoft Corp CDR and Pentagon I Capital 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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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.