Correlation Between Microsoft and Collegeadvantage

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

By analyzing existing cross correlation between Microsoft and Collegeadvantage 529 Savings, you can compare the effects of market volatilities on Microsoft and Collegeadvantage 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 Collegeadvantage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Collegeadvantage.

Diversification Opportunities for Microsoft and Collegeadvantage

0.58

Correlation Coefficient

Microsoft  Collegeadvantage

Very weak diversification

The 3 months correlation between Microsoft and Collegeadvantage is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Collegeadvantage 529 Savings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collegeadvantage 529 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 Collegeadvantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Collegeadvantage 529 has no effect on the direction of Microsoft i.e., Microsoft and Collegeadvantage go up and down completely randomly.

Pair Corralation between Microsoft and Collegeadvantage

Given the investment horizon of 90 days Microsoft is expected to generate 3.51 times more return on investment than Collegeadvantage. However, Microsoft is 3.51 times more volatile than Collegeadvantage 529 Savings. It trades about 0.06 of its potential returns per unit of risk. Collegeadvantage 529 Savings is currently generating about -0.02 per unit of risk. If you would invest  42,574  in Microsoft on September 27, 2024 and sell it today you would earn a total of  1,359  from holding Microsoft or generate 3.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.67%
Values	Daily Returns

Microsoft  vs.  Collegeadvantage 529 Savings

Microsoft

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 3 (%) 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.

Collegeadvantage 529

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Collegeadvantage 529 Savings has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Collegeadvantage 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 Collegeadvantage

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

The idea behind Microsoft and Collegeadvantage 529 Savings 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.