Correlation Between Microsoft and Telling Telecommunicatio

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

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

Diversification Opportunities for Microsoft and Telling Telecommunicatio

-0.02

Correlation Coefficient

Microsoft  Telling Telecommunicatio

Good diversification

The 3 months correlation between Microsoft and Telling is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Telling Telecommunication Hold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telling Telecommunicatio and Microsoft 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 are associated (or correlated) with Telling Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telling Telecommunicatio has no effect on the direction of Microsoft i.e., Microsoft and Telling Telecommunicatio go up and down completely randomly.

Pair Corralation between Microsoft and Telling Telecommunicatio

Given the investment horizon of 90 days Microsoft is expected to under-perform the Telling Telecommunicatio. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.29 times less risky than Telling Telecommunicatio. The stock trades about -0.11 of its potential returns per unit of risk. The Telling Telecommunication Holding is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,223  in Telling Telecommunication Holding on December 25, 2024 and sell it today you would lose (124.00) from holding Telling Telecommunication Holding or give up 10.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.61%
Values	Daily Returns

Microsoft  vs.  Telling Telecommunication Hold

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Telling Telecommunicatio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Telling Telecommunication Holding 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 and Telling Telecommunicatio

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

The idea behind Microsoft and Telling Telecommunication Holding 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.