Correlation Between Microsoft and Investment

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

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

Diversification Opportunities for Microsoft and Investment

-0.41

Correlation Coefficient

Microsoft  Investment

Very good diversification

The 3 months correlation between Microsoft and Investment is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Investment And Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment And Const 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 Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment And Const has no effect on the direction of Microsoft i.e., Microsoft and Investment go up and down completely randomly.

Pair Corralation between Microsoft and Investment

Given the investment horizon of 90 days Microsoft is expected to generate 0.28 times more return on investment than Investment. However, Microsoft is 3.53 times less risky than Investment. It trades about 0.01 of its potential returns per unit of risk. Investment And Construction is currently generating about -0.01 per unit of risk. If you would invest  42,944  in Microsoft on September 28, 2024 and sell it today you would earn a total of  126.00  from holding Microsoft or generate 0.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Microsoft  vs.  Investment And Construction

Microsoft

Risk-Adjusted Performance

0 of 100

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.

Investment And Const

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investment And Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Investment 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 Investment

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

The idea behind Microsoft and Investment And Construction 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.