Correlation Between Microsoft and Accuride Corp

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

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

Diversification Opportunities for Microsoft and Accuride Corp

0.0

Correlation Coefficient

Microsoft  Accuride Corp

Pay attention - limited upside

The 3 months correlation between Microsoft and Accuride is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Accuride Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Accuride Corp 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 Accuride Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Accuride Corp has no effect on the direction of Microsoft i.e., Microsoft and Accuride Corp go up and down completely randomly.

Pair Corralation between Microsoft and Accuride Corp

If you would invest  42,995  in Microsoft on September 18, 2024 and sell it today you would earn a total of  2,164  from holding Microsoft or generate 5.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Microsoft  vs.  Accuride Corp

Microsoft

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 5 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Accuride Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Accuride Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Accuride Corp is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Microsoft and Accuride Corp

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

The idea behind Microsoft and Accuride Corp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.