Correlation Between Microsoft and HMCIB SPAC

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

By analyzing existing cross correlation between Microsoft and HMCIB SPAC 3, you can compare the effects of market volatilities on Microsoft and HMCIB SPAC 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 HMCIB SPAC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and HMCIB SPAC.

Diversification Opportunities for Microsoft and HMCIB SPAC

-0.6

Correlation Coefficient

Microsoft  HMCIB SPAC

Excellent diversification

The 3 months correlation between Microsoft and HMCIB is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and HMCIB SPAC 3 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMCIB SPAC 3 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 HMCIB SPAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMCIB SPAC 3 has no effect on the direction of Microsoft i.e., Microsoft and HMCIB SPAC go up and down completely randomly.

Pair Corralation between Microsoft and HMCIB SPAC

Given the investment horizon of 90 days Microsoft is expected to under-perform the HMCIB SPAC. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 3.01 times less risky than HMCIB SPAC. The stock trades about -0.2 of its potential returns per unit of risk. The HMCIB SPAC 3 is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  123,600  in HMCIB SPAC 3 on October 7, 2024 and sell it today you would earn a total of  18,600  from holding HMCIB SPAC 3 or generate 15.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Microsoft  vs.  HMCIB SPAC 3

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

HMCIB SPAC 3

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HMCIB SPAC 3 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Microsoft and HMCIB SPAC

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

The idea behind Microsoft and HMCIB SPAC 3 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.