Correlation Between Microsoft and Acutus Medical

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

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

Diversification Opportunities for Microsoft and Acutus Medical

0.22

Correlation Coefficient

Microsoft  Acutus Medical

Modest diversification

The 3 months correlation between Microsoft and Acutus is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Acutus Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acutus Medical 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 Acutus Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acutus Medical has no effect on the direction of Microsoft i.e., Microsoft and Acutus Medical go up and down completely randomly.

Pair Corralation between Microsoft and Acutus Medical

Given the investment horizon of 90 days Microsoft is expected to generate 0.25 times more return on investment than Acutus Medical. However, Microsoft is 3.94 times less risky than Acutus Medical. It trades about 0.09 of its potential returns per unit of risk. Acutus Medical is currently generating about -0.1 per unit of risk. If you would invest  23,866  in Microsoft on October 14, 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 Together
Strength	Very Weak
Accuracy	25.6%
Values	Daily Returns

Microsoft  vs.  Acutus Medical

Microsoft

Risk-Adjusted Performance

0 of 100

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 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.

Acutus Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acutus Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Acutus Medical is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Acutus Medical

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

The idea behind Microsoft and Acutus Medical 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..