Correlation Between Microsoft and REX Crypto

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

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

Diversification Opportunities for Microsoft and REX Crypto

0.32

Correlation Coefficient

Microsoft  REX Crypto

Weak diversification

The 3 months correlation between Microsoft and REX is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and REX Crypto Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REX Crypto Equity 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 REX Crypto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REX Crypto Equity has no effect on the direction of Microsoft i.e., Microsoft and REX Crypto go up and down completely randomly.

Pair Corralation between Microsoft and REX Crypto

Given the investment horizon of 90 days Microsoft is expected to under-perform the REX Crypto. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.48 times less risky than REX Crypto. The stock trades about -0.12 of its potential returns per unit of risk. The REX Crypto Equity is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  4,493  in REX Crypto Equity on December 20, 2024 and sell it today you would lose (463.00) from holding REX Crypto Equity or give up 10.3% of portfolio value over 90 days.

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

Microsoft  vs.  REX Crypto Equity

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.

REX Crypto Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days REX Crypto Equity has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

Pair Trading with Microsoft and REX Crypto

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

The idea behind Microsoft and REX Crypto Equity 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..