Correlation Between Microsoft and Resorttrust

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

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

Diversification Opportunities for Microsoft and Resorttrust

0.28

Correlation Coefficient

Microsoft  Resorttrust

Modest diversification

The 3 months correlation between Microsoft and Resorttrust is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Resorttrust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Resorttrust 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 Resorttrust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Resorttrust has no effect on the direction of Microsoft i.e., Microsoft and Resorttrust go up and down completely randomly.

Pair Corralation between Microsoft and Resorttrust

Assuming the 90 days trading horizon Microsoft is expected to under-perform the Resorttrust. In addition to that, Microsoft is 1.08 times more volatile than Resorttrust. It trades about -0.12 of its total potential returns per unit of risk. Resorttrust is currently generating about -0.03 per unit of volatility. If you would invest  1,890  in Resorttrust on December 24, 2024 and sell it today you would lose (60.00) from holding Resorttrust or give up 3.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Microsoft  vs.  Resorttrust

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 latest fragile performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Resorttrust

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Microsoft and Resorttrust

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

The idea behind Microsoft and Resorttrust 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.