Correlation Between Microsoft and Close Loop

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

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

Diversification Opportunities for Microsoft and Close Loop

0.37

Correlation Coefficient

Microsoft  Close Loop

Weak diversification

The 3 months correlation between Microsoft and Close is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Close The Loop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Close The Loop 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 Close Loop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Close The Loop has no effect on the direction of Microsoft i.e., Microsoft and Close Loop go up and down completely randomly.

Pair Corralation between Microsoft and Close Loop

Given the investment horizon of 90 days Microsoft is expected to under-perform the Close Loop. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.43 times less risky than Close Loop. The stock trades about -0.22 of its potential returns per unit of risk. The Close The Loop is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  23.00  in Close The Loop on October 8, 2024 and sell it today you would earn a total of  1.00  from holding Close The Loop or generate 4.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.0%
Values	Daily Returns

Microsoft  vs.  Close The Loop

Microsoft

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 2 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Close The Loop

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Close The Loop are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Close Loop unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Close Loop

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

The idea behind Microsoft and Close The Loop 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.