Correlation Between Microsoft and Choice Properties

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

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

Diversification Opportunities for Microsoft and Choice Properties

-0.26

Correlation Coefficient

Microsoft  Choice Properties

Very good diversification

The 3 months correlation between Microsoft and Choice is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Choice Properties Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choice Properties Real 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 Choice Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choice Properties Real has no effect on the direction of Microsoft i.e., Microsoft and Choice Properties go up and down completely randomly.

Pair Corralation between Microsoft and Choice Properties

Given the investment horizon of 90 days Microsoft is expected to generate 1.09 times more return on investment than Choice Properties. However, Microsoft is 1.09 times more volatile than Choice Properties Real. It trades about 0.06 of its potential returns per unit of risk. Choice Properties Real is currently generating about -0.14 per unit of risk. If you would invest  43,048  in Microsoft on September 14, 2024 and sell it today you would earn a total of  1,908  from holding Microsoft or generate 4.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.06%
Values	Daily Returns

Microsoft  vs.  Choice Properties Real

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

Choice Properties Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Choice Properties Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Microsoft and Choice Properties

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

The idea behind Microsoft and Choice Properties Real 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.