Correlation Between Microsoft Corp and Senvest Capital

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

Diversification Opportunities for Microsoft Corp and Senvest Capital

0.76

Correlation Coefficient

Microsoft Corp  Senvest Capital

Poor diversification

The 3 months correlation between Microsoft and Senvest is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp CDR and Senvest Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senvest Capital 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 Senvest Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Senvest Capital has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and Senvest Capital go up and down completely randomly.

Pair Corralation between Microsoft Corp and Senvest Capital

Assuming the 90 days trading horizon Microsoft Corp is expected to generate 1.07 times less return on investment than Senvest Capital. In addition to that, Microsoft Corp is 1.88 times more volatile than Senvest Capital. It trades about 0.21 of its total potential returns per unit of risk. Senvest Capital is currently generating about 0.42 per unit of volatility. If you would invest  33,000  in Senvest Capital on September 22, 2024 and sell it today you would earn a total of  2,000  from holding Senvest Capital or generate 6.06% return on investment over 90 days.

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

Microsoft Corp CDR  vs.  Senvest Capital

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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Senvest Capital

Risk-Adjusted Performance

15 of 100

Good

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

Pair Trading with Microsoft Corp and Senvest Capital

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

The idea behind Microsoft Corp CDR and Senvest Capital 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.

Check out your portfolio center.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.