Correlation Between Microsoft Corp and Slate Office

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

Diversification Opportunities for Microsoft Corp and Slate Office

-0.63

Correlation Coefficient

Microsoft Corp  Slate Office

Excellent diversification

The 3 months correlation between Microsoft and Slate is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp CDR and Slate Office REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Slate Office REIT 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 Slate Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Slate Office REIT has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and Slate Office go up and down completely randomly.

Pair Corralation between Microsoft Corp and Slate Office

Assuming the 90 days trading horizon Microsoft Corp CDR is expected to generate 0.12 times more return on investment than Slate Office. However, Microsoft Corp CDR is 8.21 times less risky than Slate Office. It trades about 0.07 of its potential returns per unit of risk. Slate Office REIT is currently generating about -0.03 per unit of risk. If you would invest  3,006  in Microsoft Corp CDR on October 6, 2024 and sell it today you would earn a total of  89.00  from holding Microsoft Corp CDR or generate 2.96% return on investment over 90 days.

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

Microsoft Corp CDR  vs.  Slate Office REIT

Microsoft Corp CDR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft Corp CDR are ranked lower than 3 (%) 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.

Slate Office REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Slate Office REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Microsoft Corp and Slate Office

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

The idea behind Microsoft Corp CDR and Slate Office REIT 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.