Correlation Between Microsoft and Castor Maritime

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

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

Diversification Opportunities for Microsoft and Castor Maritime

0.45

Correlation Coefficient

Microsoft  Castor Maritime

Very weak diversification

The 3 months correlation between Microsoft and Castor is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Castor Maritime in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Castor Maritime 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 Castor Maritime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Castor Maritime has no effect on the direction of Microsoft i.e., Microsoft and Castor Maritime go up and down completely randomly.

Pair Corralation between Microsoft and Castor Maritime

Given the investment horizon of 90 days Microsoft is expected to generate 0.46 times more return on investment than Castor Maritime. However, Microsoft is 2.18 times less risky than Castor Maritime. It trades about -0.21 of its potential returns per unit of risk. Castor Maritime is currently generating about -0.24 per unit of risk. If you would invest  41,416  in Microsoft on December 1, 2024 and sell it today you would lose (1,717) from holding Microsoft or give up 4.15% of portfolio value over 90 days.

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

Microsoft  vs.  Castor Maritime

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.

Castor Maritime

Risk-Adjusted Performance

Very Weak

Over the last 90 days Castor Maritime has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Microsoft and Castor Maritime

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

The idea behind Microsoft and Castor Maritime 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.