Correlation Between Microsoft and EFU General

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

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

Diversification Opportunities for Microsoft and EFU General

0.33

Correlation Coefficient

Microsoft  EFU General

Weak diversification

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

Pair Corralation between Microsoft and EFU General

Given the investment horizon of 90 days Microsoft is expected to generate 7.61 times less return on investment than EFU General. But when comparing it to its historical volatility, Microsoft is 2.87 times less risky than EFU General. It trades about 0.06 of its potential returns per unit of risk. EFU General Insurance is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  8,911  in EFU General Insurance on September 14, 2024 and sell it today you would earn a total of  3,390  from holding EFU General Insurance or generate 38.04% return on investment over 90 days.

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

Microsoft  vs.  EFU General Insurance

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.

EFU General Insurance

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EFU General Insurance are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, EFU General sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and EFU General

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

The idea behind Microsoft and EFU General Insurance 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.