Correlation Between Microsoft and KASPIKZ 1

Can any of the company-specific risk be diversified away by investing in both Microsoft and KASPIKZ 1 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 KASPIKZ 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and KASPIKZ 1, you can compare the effects of market volatilities on Microsoft and KASPIKZ 1 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 KASPIKZ 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and KASPIKZ 1.

Diversification Opportunities for Microsoft and KASPIKZ 1

0.46

Correlation Coefficient

Microsoft  KASPIKZ 1

Very weak diversification

The 3 months correlation between Microsoft and KASPIKZ is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and KASPIKZ 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KASPIKZ 1 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 KASPIKZ 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KASPIKZ 1 has no effect on the direction of Microsoft i.e., Microsoft and KASPIKZ 1 go up and down completely randomly.

Pair Corralation between Microsoft and KASPIKZ 1

Assuming the 90 days horizon Microsoft is expected to generate 0.46 times more return on investment than KASPIKZ 1. However, Microsoft is 2.17 times less risky than KASPIKZ 1. It trades about 0.25 of its potential returns per unit of risk. KASPIKZ 1 is currently generating about -0.07 per unit of risk. If you would invest  39,470  in Microsoft on September 22, 2024 and sell it today you would earn a total of  2,640  from holding Microsoft or generate 6.69% return on investment over 90 days.

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

Microsoft  vs.  KASPIKZ 1

Microsoft

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in January 2025.

KASPIKZ 1

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KASPIKZ 1 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, KASPIKZ 1 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Microsoft and KASPIKZ 1

The main advantage of trading using opposite Microsoft and KASPIKZ 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, KASPIKZ 1 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 KASPIKZ 1 will offset losses from the drop in KASPIKZ 1's long position.

The idea behind Microsoft and KASPIKZ 1 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.