Correlation Between Microsoft and COMPUTER MODELLING

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

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

Diversification Opportunities for Microsoft and COMPUTER MODELLING

0.67

Correlation Coefficient

Microsoft  COMPUTER MODELLING

Poor diversification

The 3 months correlation between Microsoft and COMPUTER is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and COMPUTER MODELLING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMPUTER MODELLING 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 COMPUTER MODELLING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMPUTER MODELLING has no effect on the direction of Microsoft i.e., Microsoft and COMPUTER MODELLING go up and down completely randomly.

Pair Corralation between Microsoft and COMPUTER MODELLING

Assuming the 90 days trading horizon Microsoft is expected to generate 8.61 times more return on investment than COMPUTER MODELLING. However, Microsoft is 8.61 times more volatile than COMPUTER MODELLING. It trades about 0.07 of its potential returns per unit of risk. COMPUTER MODELLING is currently generating about 0.13 per unit of risk. If you would invest  39,507  in Microsoft on October 22, 2024 and sell it today you would earn a total of  2,343  from holding Microsoft or generate 5.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Microsoft  vs.  COMPUTER MODELLING

Microsoft

Risk-Adjusted Performance

5 of 100

OK

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 unsteady basic indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in February 2025.

COMPUTER MODELLING

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COMPUTER MODELLING are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward-looking indicators, COMPUTER MODELLING is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Microsoft and COMPUTER MODELLING

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

The idea behind Microsoft and COMPUTER MODELLING 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.