Correlation Between Microsoft and Analog Devices,

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

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

Diversification Opportunities for Microsoft and Analog Devices,

0.54

Correlation Coefficient

Microsoft  Analog Devices,

Very weak diversification

The 3 months correlation between Microsoft and Analog is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Analog Devices, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices, 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 Analog Devices,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices, has no effect on the direction of Microsoft i.e., Microsoft and Analog Devices, go up and down completely randomly.

Pair Corralation between Microsoft and Analog Devices,

Given the investment horizon of 90 days Microsoft is expected to under-perform the Analog Devices,. In addition to that, Microsoft is 1.39 times more volatile than Analog Devices,. It trades about -0.23 of its total potential returns per unit of risk. Analog Devices, is currently generating about 0.09 per unit of volatility. If you would invest  64,218  in Analog Devices, on October 8, 2024 and sell it today you would earn a total of  822.00  from holding Analog Devices, or generate 1.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	89.47%
Values	Daily Returns

Microsoft  vs.  Analog Devices,

Microsoft

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 2 (%) 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.

Analog Devices,

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Analog Devices, are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Analog Devices, 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 Analog Devices,

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

The idea behind Microsoft and Analog Devices, 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.