Correlation Between Microsoft and Centurion Acquisition

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

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

Diversification Opportunities for Microsoft and Centurion Acquisition

0.08

Correlation Coefficient

Microsoft  Centurion Acquisition

Significant diversification

The 3 months correlation between Microsoft and Centurion is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Centurion Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centurion Acquisition 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 Centurion Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centurion Acquisition has no effect on the direction of Microsoft i.e., Microsoft and Centurion Acquisition go up and down completely randomly.

Pair Corralation between Microsoft and Centurion Acquisition

Given the investment horizon of 90 days Microsoft is expected to generate 7.8 times more return on investment than Centurion Acquisition. However, Microsoft is 7.8 times more volatile than Centurion Acquisition Corp. It trades about 0.07 of its potential returns per unit of risk. Centurion Acquisition Corp is currently generating about 0.09 per unit of risk. If you would invest  40,808  in Microsoft on September 4, 2024 and sell it today you would earn a total of  2,290  from holding Microsoft or generate 5.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Microsoft  vs.  Centurion Acquisition Corp

Microsoft

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Centurion Acquisition

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Centurion Acquisition Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Centurion Acquisition is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Microsoft and Centurion Acquisition

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

The idea behind Microsoft and Centurion Acquisition Corp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.