Correlation Between Microsoft and Azzad Ethical

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

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

Diversification Opportunities for Microsoft and Azzad Ethical

0.48

Correlation Coefficient

Microsoft  Azzad Ethical

Very weak diversification

The 3 months correlation between Microsoft and Azzad is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Azzad Ethical Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azzad Ethical 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 Azzad Ethical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azzad Ethical has no effect on the direction of Microsoft i.e., Microsoft and Azzad Ethical go up and down completely randomly.

Pair Corralation between Microsoft and Azzad Ethical

Given the investment horizon of 90 days Microsoft is expected to under-perform the Azzad Ethical. In addition to that, Microsoft is 1.45 times more volatile than Azzad Ethical Fund. It trades about -0.1 of its total potential returns per unit of risk. Azzad Ethical Fund is currently generating about -0.13 per unit of volatility. If you would invest  1,637  in Azzad Ethical Fund on December 22, 2024 and sell it today you would lose (139.00) from holding Azzad Ethical Fund or give up 8.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  Azzad Ethical Fund

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.

Azzad Ethical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Azzad Ethical Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Microsoft and Azzad Ethical

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

The idea behind Microsoft and Azzad Ethical Fund 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.