Correlation Between Microsoft and Al Tawfeek

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

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

Diversification Opportunities for Microsoft and Al Tawfeek

0.33

Correlation Coefficient

Microsoft  Al Tawfeek

Weak diversification

The 3 months correlation between Microsoft and ATLC is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Al Tawfeek Leasing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Al Tawfeek Leasing 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 Al Tawfeek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Al Tawfeek Leasing has no effect on the direction of Microsoft i.e., Microsoft and Al Tawfeek go up and down completely randomly.

Pair Corralation between Microsoft and Al Tawfeek

Given the investment horizon of 90 days Microsoft is expected to generate 1.34 times less return on investment than Al Tawfeek. But when comparing it to its historical volatility, Microsoft is 2.37 times less risky than Al Tawfeek. It trades about 0.06 of its potential returns per unit of risk. Al Tawfeek Leasing is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  370.00  in Al Tawfeek Leasing on September 12, 2024 and sell it today you would earn a total of  72.00  from holding Al Tawfeek Leasing or generate 19.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	78.13%
Values	Daily Returns

Microsoft  vs.  Al Tawfeek Leasing

Microsoft

Risk-Adjusted Performance

4 of 100

Modest

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Al Tawfeek Leasing

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Al Tawfeek Leasing are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Al Tawfeek reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Al Tawfeek

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

The idea behind Microsoft and Al Tawfeek Leasing 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.

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 the Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.