Correlation Between Microsoft and Capital Nasdaq

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

By analyzing existing cross correlation between Microsoft and Capital Nasdaq Biotechnology, you can compare the effects of market volatilities on Microsoft and Capital Nasdaq 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 Capital Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Capital Nasdaq.

Diversification Opportunities for Microsoft and Capital Nasdaq

0.05

Correlation Coefficient

Microsoft  Capital Nasdaq

Significant diversification

The 3 months correlation between Microsoft and Capital is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Capital Nasdaq Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Nasdaq Biote 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 Capital Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Nasdaq Biote has no effect on the direction of Microsoft i.e., Microsoft and Capital Nasdaq go up and down completely randomly.

Pair Corralation between Microsoft and Capital Nasdaq

Given the investment horizon of 90 days Microsoft is expected to generate 1.13 times more return on investment than Capital Nasdaq. However, Microsoft is 1.13 times more volatile than Capital Nasdaq Biotechnology. It trades about 0.04 of its potential returns per unit of risk. Capital Nasdaq Biotechnology is currently generating about -0.1 per unit of risk. If you would invest  43,428  in Microsoft on September 17, 2024 and sell it today you would earn a total of  1,299  from holding Microsoft or generate 2.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.92%
Values	Daily Returns

Microsoft  vs.  Capital Nasdaq Biotechnology

Microsoft

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Capital Nasdaq Biote

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Nasdaq Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with Microsoft and Capital Nasdaq

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

The idea behind Microsoft and Capital Nasdaq Biotechnology 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..