Correlation Between Microsoft and 495330

Can any of the company-specific risk be diversified away by investing in both Microsoft and 495330 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 495330 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and 495330, you can compare the effects of market volatilities on Microsoft and 495330 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 495330. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and 495330.

Diversification Opportunities for Microsoft and 495330

-0.52

Correlation Coefficient

Microsoft  495330

Excellent diversification

The 3 months correlation between Microsoft and 495330 is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and 495330 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 495330 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 495330. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 495330 has no effect on the direction of Microsoft i.e., Microsoft and 495330 go up and down completely randomly.

Pair Corralation between Microsoft and 495330

Given the investment horizon of 90 days Microsoft is expected to generate 1.19 times more return on investment than 495330. However, Microsoft is 1.19 times more volatile than 495330. It trades about 0.09 of its potential returns per unit of risk. 495330 is currently generating about 0.01 per unit of risk. If you would invest  23,866  in Microsoft on October 12, 2024 and sell it today you would earn a total of  18,029  from holding Microsoft or generate 75.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	9.49%
Values	Daily Returns

Microsoft  vs.  495330

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) 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.

495330

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days 495330 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 495330 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 495330

The main advantage of trading using opposite Microsoft and 495330 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, 495330 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 495330 will offset losses from the drop in 495330's long position.

The idea behind Microsoft and 495330 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.