Correlation Between Microsoft and Evolve Active

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

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

Diversification Opportunities for Microsoft and Evolve Active

0.66

Correlation Coefficient

Microsoft  Evolve Active

Poor diversification

The 3 months correlation between Microsoft and Evolve is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Evolve Active Canadian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolve Active Canadian 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 Evolve Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolve Active Canadian has no effect on the direction of Microsoft i.e., Microsoft and Evolve Active go up and down completely randomly.

Pair Corralation between Microsoft and Evolve Active

Given the investment horizon of 90 days Microsoft is expected to generate 5.82 times more return on investment than Evolve Active. However, Microsoft is 5.82 times more volatile than Evolve Active Canadian. It trades about 0.07 of its potential returns per unit of risk. Evolve Active Canadian is currently generating about 0.28 per unit of risk. If you would invest  42,346  in Microsoft on September 29, 2024 and sell it today you would earn a total of  707.00  from holding Microsoft or generate 1.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  Evolve Active Canadian

Microsoft

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Evolve Active Canadian

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Evolve Active Canadian are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Evolve Active is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Evolve Active

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

The idea behind Microsoft and Evolve Active Canadian 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.