Correlation Between Microsoft and Nuveen Nebraska

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

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

Diversification Opportunities for Microsoft and Nuveen Nebraska

0.15

Correlation Coefficient

Microsoft  Nuveen Nebraska

Average diversification

The 3 months correlation between Microsoft and Nuveen is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Nuveen Nebraska Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Nebraska Municipal 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 Nuveen Nebraska. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Nebraska Municipal has no effect on the direction of Microsoft i.e., Microsoft and Nuveen Nebraska go up and down completely randomly.

Pair Corralation between Microsoft and Nuveen Nebraska

Given the investment horizon of 90 days Microsoft is expected to generate 4.6 times more return on investment than Nuveen Nebraska. However, Microsoft is 4.6 times more volatile than Nuveen Nebraska Municipal. It trades about 0.05 of its potential returns per unit of risk. Nuveen Nebraska Municipal is currently generating about 0.07 per unit of risk. If you would invest  40,862  in Microsoft on September 2, 2024 and sell it today you would earn a total of  1,484  from holding Microsoft or generate 3.63% return on investment over 90 days.

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

Microsoft  vs.  Nuveen Nebraska Municipal

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.

Nuveen Nebraska Municipal

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Nebraska Municipal are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Nuveen Nebraska is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Nuveen Nebraska

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

The idea behind Microsoft and Nuveen Nebraska Municipal 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.