Correlation Between Microsoft and COMMERCIAL BANK

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

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

Diversification Opportunities for Microsoft and COMMERCIAL BANK

-0.61

Correlation Coefficient

Microsoft  COMMERCIAL BANK

Excellent diversification

The 3 months correlation between Microsoft and COMMERCIAL is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and COMMERCIAL BANK OF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMMERCIAL BANK 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 COMMERCIAL BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMMERCIAL BANK has no effect on the direction of Microsoft i.e., Microsoft and COMMERCIAL BANK go up and down completely randomly.

Pair Corralation between Microsoft and COMMERCIAL BANK

Given the investment horizon of 90 days Microsoft is expected to under-perform the COMMERCIAL BANK. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.1 times less risky than COMMERCIAL BANK. The stock trades about -0.12 of its potential returns per unit of risk. The COMMERCIAL BANK OF is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  9,750  in COMMERCIAL BANK OF on December 4, 2024 and sell it today you would earn a total of  2,625  from holding COMMERCIAL BANK OF or generate 26.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Microsoft  vs.  COMMERCIAL BANK OF

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.

COMMERCIAL BANK

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in COMMERCIAL BANK OF are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, COMMERCIAL BANK sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and COMMERCIAL BANK

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

The idea behind Microsoft and COMMERCIAL BANK OF 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.