Correlation Between Microsoft and Thanulux Public

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

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

Diversification Opportunities for Microsoft and Thanulux Public

0.05

Correlation Coefficient

Microsoft  Thanulux Public

Significant diversification

The 3 months correlation between Microsoft and Thanulux is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Thanulux Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thanulux Public 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 Thanulux Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thanulux Public has no effect on the direction of Microsoft i.e., Microsoft and Thanulux Public go up and down completely randomly.

Pair Corralation between Microsoft and Thanulux Public

Given the investment horizon of 90 days Microsoft is expected to generate 217.59 times less return on investment than Thanulux Public. But when comparing it to its historical volatility, Microsoft is 102.46 times less risky than Thanulux Public. It trades about 0.05 of its potential returns per unit of risk. Thanulux Public is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,625  in Thanulux Public on September 16, 2024 and sell it today you would lose (25.00) from holding Thanulux Public or give up 0.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.38%
Values	Daily Returns

Microsoft  vs.  Thanulux Public

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.

Thanulux Public

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thanulux Public are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Thanulux Public disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Thanulux Public

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

The idea behind Microsoft and Thanulux Public 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.