Correlation Between Microsoft and Nuintek CoLtd

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

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

Diversification Opportunities for Microsoft and Nuintek CoLtd

0.44

Correlation Coefficient

Microsoft  Nuintek CoLtd

Very weak diversification

The 3 months correlation between Microsoft and Nuintek is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Nuintek CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuintek CoLtd 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 Nuintek CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuintek CoLtd has no effect on the direction of Microsoft i.e., Microsoft and Nuintek CoLtd go up and down completely randomly.

Pair Corralation between Microsoft and Nuintek CoLtd

Given the investment horizon of 90 days Microsoft is expected to under-perform the Nuintek CoLtd. In addition to that, Microsoft is 1.56 times more volatile than Nuintek CoLtd. It trades about -0.08 of its total potential returns per unit of risk. Nuintek CoLtd is currently generating about -0.03 per unit of volatility. If you would invest  48,500  in Nuintek CoLtd on December 29, 2024 and sell it today you would lose (1,000.00) from holding Nuintek CoLtd or give up 2.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.08%
Values	Daily Returns

Microsoft  vs.  Nuintek CoLtd

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.

Nuintek CoLtd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuintek CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Nuintek CoLtd is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Nuintek CoLtd

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

The idea behind Microsoft and Nuintek CoLtd 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.