Correlation Between Microsoft and Cromwell Property

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

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

Diversification Opportunities for Microsoft and Cromwell Property

-0.31

Correlation Coefficient

Microsoft  Cromwell Property

Very good diversification

The 3 months correlation between Microsoft and Cromwell is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Cromwell Property Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cromwell Property 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 Cromwell Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cromwell Property has no effect on the direction of Microsoft i.e., Microsoft and Cromwell Property go up and down completely randomly.

Pair Corralation between Microsoft and Cromwell Property

Given the investment horizon of 90 days Microsoft is expected to generate 2.69 times more return on investment than Cromwell Property. However, Microsoft is 2.69 times more volatile than Cromwell Property Group. It trades about 0.06 of its potential returns per unit of risk. Cromwell Property Group is currently generating about 0.13 per unit of risk. If you would invest  42,973  in Microsoft on September 13, 2024 and sell it today you would earn a total of  1,974  from holding Microsoft or generate 4.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Microsoft  vs.  Cromwell Property Group

Microsoft

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 4 (%) 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.

Cromwell Property

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cromwell Property Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Cromwell Property is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Microsoft and Cromwell Property

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

The idea behind Microsoft and Cromwell Property Group 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.