Correlation Between Microsoft and CUSTODIAN INVESTMENT

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

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

Diversification Opportunities for Microsoft and CUSTODIAN INVESTMENT

0.41

Correlation Coefficient

Microsoft  CUSTODIAN INVESTMENT

Very weak diversification

The 3 months correlation between Microsoft and CUSTODIAN is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and CUSTODIAN INVESTMENT PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CUSTODIAN INVESTMENT PLC 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 CUSTODIAN INVESTMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CUSTODIAN INVESTMENT PLC has no effect on the direction of Microsoft i.e., Microsoft and CUSTODIAN INVESTMENT go up and down completely randomly.

Pair Corralation between Microsoft and CUSTODIAN INVESTMENT

Given the investment horizon of 90 days Microsoft is expected to generate 1.83 times less return on investment than CUSTODIAN INVESTMENT. But when comparing it to its historical volatility, Microsoft is 2.23 times less risky than CUSTODIAN INVESTMENT. It trades about 0.06 of its potential returns per unit of risk. CUSTODIAN INVESTMENT PLC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,300  in CUSTODIAN INVESTMENT PLC on September 14, 2024 and sell it today you would earn a total of  85.00  from holding CUSTODIAN INVESTMENT PLC or generate 6.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Microsoft  vs.  CUSTODIAN INVESTMENT PLC

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

CUSTODIAN INVESTMENT PLC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CUSTODIAN INVESTMENT PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, CUSTODIAN INVESTMENT may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Microsoft and CUSTODIAN INVESTMENT

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

The idea behind Microsoft and CUSTODIAN INVESTMENT PLC 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.