Correlation Between Microsoft and Pacer Financial

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

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

Diversification Opportunities for Microsoft and Pacer Financial

0.0

Correlation Coefficient

Microsoft  Pacer Financial

Pay attention - limited upside

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

Pair Corralation between Microsoft and Pacer Financial

If you would invest  43,048  in Microsoft on September 16, 2024 and sell it today you would earn a total of  1,679  from holding Microsoft or generate 3.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Microsoft  vs.  Pacer Financial

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

Pacer Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacer Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Pacer Financial is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Microsoft and Pacer Financial

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

The idea behind Microsoft and Pacer Financial 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.