Correlation Between Microsoft and MARKET VECTR

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

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

Diversification Opportunities for Microsoft and MARKET VECTR

0.87

Correlation Coefficient

Microsoft  MARKET VECTR

Very poor diversification

The 3 months correlation between Microsoft and MARKET is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and MARKET VECTR RETAIL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MARKET VECTR RETAIL 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 MARKET VECTR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MARKET VECTR RETAIL has no effect on the direction of Microsoft i.e., Microsoft and MARKET VECTR go up and down completely randomly.

Pair Corralation between Microsoft and MARKET VECTR

Assuming the 90 days trading horizon Microsoft is expected to generate 1.69 times more return on investment than MARKET VECTR. However, Microsoft is 1.69 times more volatile than MARKET VECTR RETAIL. It trades about 0.11 of its potential returns per unit of risk. MARKET VECTR RETAIL is currently generating about 0.09 per unit of risk. If you would invest  20,752  in Microsoft on September 26, 2024 and sell it today you would earn a total of  21,213  from holding Microsoft or generate 102.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.41%
Values	Daily Returns

Microsoft  vs.  MARKET VECTR RETAIL

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. In spite of comparatively uncertain technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in January 2025.

MARKET VECTR RETAIL

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MARKET VECTR RETAIL are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, MARKET VECTR may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Microsoft and MARKET VECTR

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

The idea behind Microsoft and MARKET VECTR RETAIL 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.