Correlation Between Microsoft and Creative Edge

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

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

Diversification Opportunities for Microsoft and Creative Edge

0.0

Correlation Coefficient

Microsoft  Creative Edge

Pay attention - limited upside

The 3 months correlation between Microsoft and Creative is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Creative Edge Nutrit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Creative Edge Nutrit 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 Creative Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Creative Edge Nutrit has no effect on the direction of Microsoft i.e., Microsoft and Creative Edge go up and down completely randomly.

Pair Corralation between Microsoft and Creative Edge

Given the investment horizon of 90 days Microsoft is expected to generate 230.8 times less return on investment than Creative Edge. But when comparing it to its historical volatility, Microsoft is 99.39 times less risky than Creative Edge. It trades about 0.05 of its potential returns per unit of risk. Creative Edge Nutrit is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Creative Edge Nutrit on September 14, 2024 and sell it today you would earn a total of  0.00  from holding Creative Edge Nutrit or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  Creative Edge Nutrit

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.

Creative Edge Nutrit

Risk-Adjusted Performance

9 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Creative Edge Nutrit are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Creative Edge showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Creative Edge

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

The idea behind Microsoft and Creative Edge Nutrit 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.