Correlation Between Microsoft and Carillon Chartwell

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

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

Diversification Opportunities for Microsoft and Carillon Chartwell

0.4

Correlation Coefficient

Microsoft  Carillon Chartwell

Very weak diversification

The 3 months correlation between Microsoft and Carillon is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Carillon Chartwell Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carillon Chartwell Short 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 Carillon Chartwell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carillon Chartwell Short has no effect on the direction of Microsoft i.e., Microsoft and Carillon Chartwell go up and down completely randomly.

Pair Corralation between Microsoft and Carillon Chartwell

Given the investment horizon of 90 days Microsoft is expected to under-perform the Carillon Chartwell. In addition to that, Microsoft is 12.88 times more volatile than Carillon Chartwell Short. It trades about -0.03 of its total potential returns per unit of risk. Carillon Chartwell Short is currently generating about 0.21 per unit of volatility. If you would invest  926.00  in Carillon Chartwell Short on September 29, 2024 and sell it today you would earn a total of  25.00  from holding Carillon Chartwell Short or generate 2.7% return on investment over 90 days.

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

Microsoft  vs.  Carillon Chartwell Short

Microsoft

Risk-Adjusted Performance

0 of 100

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 comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Carillon Chartwell Short

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carillon Chartwell Short has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Carillon Chartwell is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Carillon Chartwell

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

The idea behind Microsoft and Carillon Chartwell Short 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.