Correlation Between Microsoft Corp and Highwood Asset

Can any of the company-specific risk be diversified away by investing in both Microsoft Corp and Highwood Asset 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 Highwood Asset 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 Highwood Asset Management, you can compare the effects of market volatilities on Microsoft Corp and Highwood Asset 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 Highwood Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft Corp and Highwood Asset.

Diversification Opportunities for Microsoft Corp and Highwood Asset

-0.22

Correlation Coefficient

Microsoft Corp  Highwood Asset

Very good diversification

The 3 months correlation between Microsoft and Highwood is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp CDR and Highwood Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highwood Asset Management 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 Highwood Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highwood Asset Management has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and Highwood Asset go up and down completely randomly.

Pair Corralation between Microsoft Corp and Highwood Asset

Assuming the 90 days trading horizon Microsoft Corp CDR is expected to generate 0.36 times more return on investment than Highwood Asset. However, Microsoft Corp CDR is 2.81 times less risky than Highwood Asset. It trades about 0.09 of its potential returns per unit of risk. Highwood Asset Management is currently generating about 0.0 per unit of risk. If you would invest  1,895  in Microsoft Corp CDR on September 26, 2024 and sell it today you would earn a total of  1,311  from holding Microsoft Corp CDR or generate 69.18% return on investment over 90 days.

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

Microsoft Corp CDR  vs.  Highwood Asset Management

Microsoft Corp CDR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft Corp CDR are ranked lower than 1 (%) 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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Highwood Asset Management

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Microsoft Corp and Highwood Asset

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

The idea behind Microsoft Corp CDR and Highwood Asset Management 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.