Correlation Between Microsoft Corp and Spectral Med

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

By analyzing existing cross correlation between Microsoft Corp CDR and Spectral Med, you can compare the effects of market volatilities on Microsoft Corp and Spectral Med 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 Corp with a short position of Spectral Med. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft Corp and Spectral Med.

Diversification Opportunities for Microsoft Corp and Spectral Med

-0.57

Correlation Coefficient

Microsoft Corp  Spectral Med

Excellent diversification

The 3 months correlation between Microsoft and Spectral is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp CDR and Spectral Med in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectral Med and Microsoft Corp 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 Corp CDR are associated (or correlated) with Spectral Med. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectral Med has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and Spectral Med go up and down completely randomly.

Pair Corralation between Microsoft Corp and Spectral Med

Assuming the 90 days trading horizon Microsoft Corp CDR is expected to under-perform the Spectral Med. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft Corp CDR is 2.7 times less risky than Spectral Med. The stock trades about -0.23 of its potential returns per unit of risk. The Spectral Med is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  53.00  in Spectral Med on October 9, 2024 and sell it today you would earn a total of  4.00  from holding Spectral Med or generate 7.55% return on investment over 90 days.

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

Microsoft Corp CDR  vs.  Spectral Med

Microsoft Corp CDR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft Corp CDR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Microsoft Corp is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Spectral Med

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spectral Med has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Spectral Med is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Microsoft Corp and Spectral Med

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

The idea behind Microsoft Corp CDR and Spectral Med 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.