Correlation Between Microsoft and Marcus Millichap

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

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

Diversification Opportunities for Microsoft and Marcus Millichap

0.38

Correlation Coefficient

Microsoft  Marcus Millichap

Weak diversification

The 3 months correlation between Microsoft and Marcus is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Marcus Millichap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marcus Millichap 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 Marcus Millichap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marcus Millichap has no effect on the direction of Microsoft i.e., Microsoft and Marcus Millichap go up and down completely randomly.

Pair Corralation between Microsoft and Marcus Millichap

Given the investment horizon of 90 days Microsoft is expected to generate 2.42 times less return on investment than Marcus Millichap. But when comparing it to its historical volatility, Microsoft is 1.33 times less risky than Marcus Millichap. It trades about 0.05 of its potential returns per unit of risk. Marcus Millichap is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,840  in Marcus Millichap on August 31, 2024 and sell it today you would earn a total of  351.00  from holding Marcus Millichap or generate 9.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  Marcus Millichap

Microsoft

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 3 (%) 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.

Marcus Millichap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Marcus Millichap are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating primary indicators, Marcus Millichap may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Microsoft and Marcus Millichap

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

The idea behind Microsoft and Marcus Millichap 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.