Correlation Between Microsoft and Eerly Govt

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

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

Diversification Opportunities for Microsoft and Eerly Govt

-0.46

Correlation Coefficient

Microsoft  Eerly Govt

Very good diversification

The 3 months correlation between Microsoft and Eerly is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Eerly Govt Ppty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eerly Govt Ppty 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 Eerly Govt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eerly Govt Ppty has no effect on the direction of Microsoft i.e., Microsoft and Eerly Govt go up and down completely randomly.

Pair Corralation between Microsoft and Eerly Govt

Given the investment horizon of 90 days Microsoft is expected to generate 1.05 times more return on investment than Eerly Govt. However, Microsoft is 1.05 times more volatile than Eerly Govt Ppty. It trades about 0.04 of its potential returns per unit of risk. Eerly Govt Ppty is currently generating about -0.21 per unit of risk. If you would invest  41,794  in Microsoft on October 21, 2024 and sell it today you would earn a total of  1,109  from holding Microsoft or generate 2.65% return on investment over 90 days.

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

Microsoft  vs.  Eerly Govt Ppty

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.

Eerly Govt Ppty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eerly Govt Ppty has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Microsoft and Eerly Govt

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

The idea behind Microsoft and Eerly Govt Ppty 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.