Correlation Between Microsoft and US Physicalrapy

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

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

Diversification Opportunities for Microsoft and US Physicalrapy

0.05

Correlation Coefficient

Microsoft  US Physicalrapy

Significant diversification

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

Pair Corralation between Microsoft and US Physicalrapy

Given the investment horizon of 90 days Microsoft is expected to generate 3.68 times less return on investment than US Physicalrapy. But when comparing it to its historical volatility, Microsoft is 2.04 times less risky than US Physicalrapy. It trades about 0.05 of its potential returns per unit of risk. US Physicalrapy is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  8,556  in US Physicalrapy on August 31, 2024 and sell it today you would earn a total of  1,152  from holding US Physicalrapy or generate 13.46% return on investment over 90 days.

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

Microsoft  vs.  US Physicalrapy

Microsoft

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 3 (%) 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.

US Physicalrapy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in US Physicalrapy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, US Physicalrapy demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and US Physicalrapy

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

The idea behind Microsoft and US Physicalrapy 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .