Correlation Between Microsoft Corp and TVA

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

Diversification Opportunities for Microsoft Corp and TVA

-0.51

Correlation Coefficient

Microsoft Corp  TVA

Excellent diversification

The 3 months correlation between Microsoft and TVA is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp CDR and TVA Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TVA Group 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 TVA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TVA Group has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and TVA go up and down completely randomly.

Pair Corralation between Microsoft Corp and TVA

Assuming the 90 days trading horizon Microsoft Corp CDR is expected to under-perform the TVA. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft Corp CDR is 3.14 times less risky than TVA. The stock trades about -0.06 of its potential returns per unit of risk. The TVA Group is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  111.00  in TVA Group on October 4, 2024 and sell it today you would lose (8.00) from holding TVA Group or give up 7.21% of portfolio value over 90 days.

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

Microsoft Corp CDR  vs.  TVA Group

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.

TVA Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TVA Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, TVA is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Microsoft Corp and TVA

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

The idea behind Microsoft Corp CDR and TVA Group 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.