Correlation Between Microsoft and Captiva Verde

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

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

Diversification Opportunities for Microsoft and Captiva Verde

-0.35

Correlation Coefficient

Microsoft  Captiva Verde

Very good diversification

The 3 months correlation between Microsoft and Captiva is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Captiva Verde Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Captiva Verde Land 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 Captiva Verde. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Captiva Verde Land has no effect on the direction of Microsoft i.e., Microsoft and Captiva Verde go up and down completely randomly.

Pair Corralation between Microsoft and Captiva Verde

Given the investment horizon of 90 days Microsoft is expected to under-perform the Captiva Verde. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 32.87 times less risky than Captiva Verde. The stock trades about -0.08 of its potential returns per unit of risk. The Captiva Verde Land is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest  0.50  in Captiva Verde Land on October 20, 2024 and sell it today you would earn a total of  2.00  from holding Captiva Verde Land or generate 400.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  Captiva Verde Land

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.

Captiva Verde Land

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Captiva Verde Land are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Captiva Verde reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Captiva Verde

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

The idea behind Microsoft and Captiva Verde Land 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.