Correlation Between Microsoft and A SPAC

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

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

Diversification Opportunities for Microsoft and A SPAC

-0.22

Correlation Coefficient

Microsoft  A SPAC

Very good diversification

The 3 months correlation between Microsoft and ASCBU is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and A SPAC II in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A SPAC II 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 A SPAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A SPAC II has no effect on the direction of Microsoft i.e., Microsoft and A SPAC go up and down completely randomly.

Pair Corralation between Microsoft and A SPAC

Given the investment horizon of 90 days Microsoft is expected to generate 0.86 times more return on investment than A SPAC. However, Microsoft is 1.16 times less risky than A SPAC. It trades about 0.05 of its potential returns per unit of risk. A SPAC II is currently generating about -0.33 per unit of risk. If you would invest  43,048  in Microsoft on September 16, 2024 and sell it today you would earn a total of  1,679  from holding Microsoft or generate 3.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	13.85%
Values	Daily Returns

Microsoft  vs.  A SPAC II

Microsoft

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 4 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

A SPAC II

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days A SPAC II has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental drivers remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Microsoft and A SPAC

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

The idea behind Microsoft and A SPAC II 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.