Correlation Between Microsoft and Polyplex PCL

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

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

Diversification Opportunities for Microsoft and Polyplex PCL

0.07

Correlation Coefficient

Microsoft  Polyplex PCL

Significant diversification

The 3 months correlation between Microsoft and Polyplex is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Polyplex PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polyplex PCL 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 Polyplex PCL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polyplex PCL has no effect on the direction of Microsoft i.e., Microsoft and Polyplex PCL go up and down completely randomly.

Pair Corralation between Microsoft and Polyplex PCL

Assuming the 90 days trading horizon Microsoft is expected to generate 0.61 times more return on investment than Polyplex PCL. However, Microsoft is 1.63 times less risky than Polyplex PCL. It trades about 0.09 of its potential returns per unit of risk. Polyplex PCL is currently generating about -0.19 per unit of risk. If you would invest  39,845  in Microsoft on October 25, 2024 and sell it today you would earn a total of  1,840  from holding Microsoft or generate 4.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.44%
Values	Daily Returns

Microsoft  vs.  Polyplex PCL

Microsoft

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Polyplex PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Polyplex PCL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Microsoft and Polyplex PCL

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

The idea behind Microsoft and Polyplex PCL 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.