Correlation Between Microsoft and HAVERTY FURNITURE

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

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

Diversification Opportunities for Microsoft and HAVERTY FURNITURE

0.56

Correlation Coefficient

Microsoft  HAVERTY FURNITURE

Very weak diversification

The 3 months correlation between Microsoft and HAVERTY is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and HAVERTY FURNITURE A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HAVERTY FURNITURE 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 HAVERTY FURNITURE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HAVERTY FURNITURE has no effect on the direction of Microsoft i.e., Microsoft and HAVERTY FURNITURE go up and down completely randomly.

Pair Corralation between Microsoft and HAVERTY FURNITURE

Assuming the 90 days trading horizon Microsoft is expected to under-perform the HAVERTY FURNITURE. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.33 times less risky than HAVERTY FURNITURE. The stock trades about -0.14 of its potential returns per unit of risk. The HAVERTY FURNITURE A is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,933  in HAVERTY FURNITURE A on December 23, 2024 and sell it today you would lose (73.00) from holding HAVERTY FURNITURE A or give up 3.78% of portfolio value over 90 days.

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

Microsoft  vs.  HAVERTY FURNITURE A

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

HAVERTY FURNITURE

Risk-Adjusted Performance

Very Weak

Over the last 90 days HAVERTY FURNITURE A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, HAVERTY FURNITURE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Microsoft and HAVERTY FURNITURE

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

The idea behind Microsoft and HAVERTY FURNITURE A 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.