Correlation Between Microsoft and Taiga Building

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

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

Diversification Opportunities for Microsoft and Taiga Building

0.14

Correlation Coefficient

Microsoft  Taiga Building

Average diversification

The 3 months correlation between Microsoft and Taiga is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Taiga Building Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiga Building Products 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 Taiga Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiga Building Products has no effect on the direction of Microsoft i.e., Microsoft and Taiga Building go up and down completely randomly.

Pair Corralation between Microsoft and Taiga Building

Given the investment horizon of 90 days Microsoft is expected to under-perform the Taiga Building. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.94 times less risky than Taiga Building. The stock trades about -0.02 of its potential returns per unit of risk. The Taiga Building Products is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  394.00  in Taiga Building Products on September 27, 2024 and sell it today you would lose (13.00) from holding Taiga Building Products or give up 3.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Microsoft  vs.  Taiga Building Products

Microsoft

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 2 (%) 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.

Taiga Building Products

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Taiga Building Products are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Taiga Building is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Taiga Building

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

The idea behind Microsoft and Taiga Building Products 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.