Correlation Between Microsoft and Domini Impact

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

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

Diversification Opportunities for Microsoft and Domini Impact

-0.19

Correlation Coefficient

Microsoft  Domini Impact

Good diversification

The 3 months correlation between Microsoft and Domini is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Domini Impact Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Domini Impact Bond 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 Domini Impact. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Domini Impact Bond has no effect on the direction of Microsoft i.e., Microsoft and Domini Impact go up and down completely randomly.

Pair Corralation between Microsoft and Domini Impact

Given the investment horizon of 90 days Microsoft is expected to under-perform the Domini Impact. In addition to that, Microsoft is 4.75 times more volatile than Domini Impact Bond. It trades about -0.01 of its total potential returns per unit of risk. Domini Impact Bond is currently generating about -0.03 per unit of volatility. If you would invest  1,029  in Domini Impact Bond on December 5, 2024 and sell it today you would lose (10.00) from holding Domini Impact Bond or give up 0.97% of portfolio value over 90 days.

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

Microsoft  vs.  Domini Impact Bond

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 abnormal performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Domini Impact Bond

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Domini Impact Bond are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Domini Impact 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 Domini Impact

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

The idea behind Microsoft and Domini Impact Bond 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.