Correlation Between Microsoft and Predex Funds

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

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

Diversification Opportunities for Microsoft and Predex Funds

0.0

Correlation Coefficient

Microsoft  Predex Funds

Pay attention - limited upside

The 3 months correlation between Microsoft and Predex is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Predex Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Predex Funds 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 Predex Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Predex Funds has no effect on the direction of Microsoft i.e., Microsoft and Predex Funds go up and down completely randomly.

Pair Corralation between Microsoft and Predex Funds

Given the investment horizon of 90 days Microsoft is expected to under-perform the Predex Funds. In addition to that, Microsoft is 62.68 times more volatile than Predex Funds. It trades about -0.01 of its total potential returns per unit of risk. Predex Funds is currently generating about -0.18 per unit of volatility. If you would invest  2,351  in Predex Funds on September 22, 2024 and sell it today you would lose (11.00) from holding Predex Funds or give up 0.47% of portfolio value over 90 days.

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

Microsoft  vs.  Predex Funds

Microsoft

Risk-Adjusted Performance

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Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) 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.

Predex Funds

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Predex Funds has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Predex Funds 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 Predex Funds

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

The idea behind Microsoft and Predex Funds 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.