Correlation Between Microsoft and Next Meats

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

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

Diversification Opportunities for Microsoft and Next Meats

-0.79

Correlation Coefficient

Microsoft  Next Meats

Pay attention - limited upside

The 3 months correlation between Microsoft and Next is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Next Meats Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Next Meats Holdings 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 Next Meats. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Next Meats Holdings has no effect on the direction of Microsoft i.e., Microsoft and Next Meats go up and down completely randomly.

Pair Corralation between Microsoft and Next Meats

Given the investment horizon of 90 days Microsoft is expected to generate 4.78 times less return on investment than Next Meats. But when comparing it to its historical volatility, Microsoft is 10.11 times less risky than Next Meats. It trades about 0.05 of its potential returns per unit of risk. Next Meats Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  0.50  in Next Meats Holdings on September 16, 2024 and sell it today you would lose (0.28) from holding Next Meats Holdings or give up 56.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.48%
Values	Daily Returns

Microsoft  vs.  Next Meats Holdings

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.

Next Meats Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Next Meats Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak primary indicators, Next Meats demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Next Meats

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

The idea behind Microsoft and Next Meats Holdings 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..