Correlation Between Microsoft and Dominion Lending

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Can any of the company-specific risk be diversified away by investing in both Microsoft and Dominion Lending 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 Dominion Lending into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Dominion Lending Centres, you can compare the effects of market volatilities on Microsoft and Dominion Lending 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 Dominion Lending. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Dominion Lending.

Diversification Opportunities for Microsoft and Dominion Lending

0.61
  Correlation Coefficient

Poor diversification

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

Pair Corralation between Microsoft and Dominion Lending

Given the investment horizon of 90 days Microsoft is expected to generate 26.06 times less return on investment than Dominion Lending. But when comparing it to its historical volatility, Microsoft is 2.0 times less risky than Dominion Lending. It trades about 0.02 of its potential returns per unit of risk. Dominion Lending Centres is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  495.00  in Dominion Lending Centres on October 23, 2024 and sell it today you would earn a total of  285.00  from holding Dominion Lending Centres or generate 57.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.36%
ValuesDaily Returns

Microsoft  vs.  Dominion Lending Centres

 Performance 
       Timeline  
Microsoft 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) 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.
Dominion Lending Centres 

Risk-Adjusted Performance

22 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Dominion Lending Centres are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Dominion Lending displayed solid returns over the last few months and may actually be approaching a breakup point.

Microsoft and Dominion Lending Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Microsoft and Dominion Lending

The main advantage of trading using opposite Microsoft and Dominion Lending positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Dominion Lending 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 Dominion Lending will offset losses from the drop in Dominion Lending's long position.
The idea behind Microsoft and Dominion Lending Centres 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.
Check out your portfolio center.
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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