Correlation Between Microsoft and Touchmark Bancshares

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

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

Diversification Opportunities for Microsoft and Touchmark Bancshares

-0.32

Correlation Coefficient

Microsoft  Touchmark Bancshares

Very good diversification

The 3 months correlation between Microsoft and Touchmark is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Touchmark Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchmark Bancshares 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 Touchmark Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchmark Bancshares has no effect on the direction of Microsoft i.e., Microsoft and Touchmark Bancshares go up and down completely randomly.

Pair Corralation between Microsoft and Touchmark Bancshares

Given the investment horizon of 90 days Microsoft is expected to generate 1.44 times more return on investment than Touchmark Bancshares. However, Microsoft is 1.44 times more volatile than Touchmark Bancshares. It trades about 0.1 of its potential returns per unit of risk. Touchmark Bancshares is currently generating about -0.04 per unit of risk. If you would invest  23,074  in Microsoft on September 18, 2024 and sell it today you would earn a total of  22,085  from holding Microsoft or generate 95.71% return on investment over 90 days.

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

Microsoft  vs.  Touchmark Bancshares

Microsoft

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 5 (%) 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.

Touchmark Bancshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Touchmark Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Microsoft and Touchmark Bancshares

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

The idea behind Microsoft and Touchmark Bancshares 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.