Correlation Between Microsoft and Electra Real

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Can any of the company-specific risk be diversified away by investing in both Microsoft and Electra Real 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 Electra Real into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Electra Real Estate, you can compare the effects of market volatilities on Microsoft and Electra Real 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 Electra Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Electra Real.

Diversification Opportunities for Microsoft and Electra Real

MicrosoftElectraDiversified AwayMicrosoftElectraDiversified Away100%
0.6
  Correlation Coefficient

Poor diversification

The 3 months correlation between Microsoft and Electra is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Electra Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electra Real Estate 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 Electra Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electra Real Estate has no effect on the direction of Microsoft i.e., Microsoft and Electra Real go up and down completely randomly.

Pair Corralation between Microsoft and Electra Real

Given the investment horizon of 90 days Microsoft is expected to generate 7.12 times less return on investment than Electra Real. But when comparing it to its historical volatility, Microsoft is 1.52 times less risky than Electra Real. It trades about 0.05 of its potential returns per unit of risk. Electra Real Estate is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  400,000  in Electra Real Estate on September 16, 2024 and sell it today you would earn a total of  95,800  from holding Electra Real Estate or generate 23.95% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy72.31%
ValuesDaily Returns

Microsoft  vs.  Electra Real Estate

 Performance 
JavaScript chart by amCharts 3.21.15OctNov -505101520
JavaScript chart by amCharts 3.21.15MSFT ELCRE
       Timeline  
Microsoft 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec410420430440450
Electra Real Estate 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Electra Real Estate are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Electra Real unveiled solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15SepOctNovDecOctNovDec3,8004,0004,2004,4004,6004,8005,0005,200

Microsoft and Electra Real Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.89-2.92-1.94-0.960.01680.992.03.014.02 0.050.100.150.200.25
JavaScript chart by amCharts 3.21.15MSFT ELCRE
       Returns  

Pair Trading with Microsoft and Electra Real

The main advantage of trading using opposite Microsoft and Electra Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Electra Real 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 Electra Real will offset losses from the drop in Electra Real's long position.
The idea behind Microsoft and Electra Real Estate 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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