Correlation Between Microsoft and EA Technique

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

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

Diversification Opportunities for Microsoft and EA Technique

-0.2

Correlation Coefficient

Microsoft  EA Technique

Good diversification

The 3 months correlation between Microsoft and 5259 is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and EA Technique M in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EA Technique M 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 EA Technique. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EA Technique M has no effect on the direction of Microsoft i.e., Microsoft and EA Technique go up and down completely randomly.

Pair Corralation between Microsoft and EA Technique

Given the investment horizon of 90 days Microsoft is expected to under-perform the EA Technique. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.1 times less risky than EA Technique. The stock trades about -0.07 of its potential returns per unit of risk. The EA Technique M is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  30.00  in EA Technique M on November 29, 2024 and sell it today you would earn a total of  0.00  from holding EA Technique M or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Microsoft  vs.  EA Technique M

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.

EA Technique M

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in EA Technique M are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, EA Technique is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Microsoft and EA Technique

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

The idea behind Microsoft and EA Technique M 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.