Correlation Between Microsoft and AXIS Capital

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

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

Diversification Opportunities for Microsoft and AXIS Capital

-0.36

Correlation Coefficient

Microsoft  AXIS Capital

Very good diversification

The 3 months correlation between Microsoft and AXIS is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and AXIS Capital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXIS Capital Holdings 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 AXIS Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXIS Capital Holdings has no effect on the direction of Microsoft i.e., Microsoft and AXIS Capital go up and down completely randomly.

Pair Corralation between Microsoft and AXIS Capital

Given the investment horizon of 90 days Microsoft is expected to under-perform the AXIS Capital. In addition to that, Microsoft is 1.52 times more volatile than AXIS Capital Holdings. It trades about -0.11 of its total potential returns per unit of risk. AXIS Capital Holdings is currently generating about 0.03 per unit of volatility. If you would invest  2,065  in AXIS Capital Holdings on December 29, 2024 and sell it today you would earn a total of  27.00  from holding AXIS Capital Holdings or generate 1.31% return on investment over 90 days.

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

Microsoft  vs.  AXIS Capital Holdings

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.

AXIS Capital Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AXIS Capital Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, AXIS Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Microsoft and AXIS Capital

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

The idea behind Microsoft and AXIS Capital Holdings 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.