Correlation Between Microsoft and Eaton Vance

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

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

Diversification Opportunities for Microsoft and Eaton Vance

0.25

Correlation Coefficient

Microsoft  Eaton Vance

Modest diversification

The 3 months correlation between Microsoft and Eaton is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Eaton Vance National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton Vance National 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 Eaton Vance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton Vance National has no effect on the direction of Microsoft i.e., Microsoft and Eaton Vance go up and down completely randomly.

Pair Corralation between Microsoft and Eaton Vance

Given the investment horizon of 90 days Microsoft is expected to under-perform the Eaton Vance. In addition to that, Microsoft is 4.06 times more volatile than Eaton Vance National. It trades about -0.28 of its total potential returns per unit of risk. Eaton Vance National is currently generating about -0.27 per unit of volatility. If you would invest  929.00  in Eaton Vance National on October 14, 2024 and sell it today you would lose (14.00) from holding Eaton Vance National or give up 1.51% of portfolio value over 90 days.

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

Microsoft  vs.  Eaton Vance National

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Eaton Vance National

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eaton Vance National has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Eaton Vance 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 Eaton Vance

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

The idea behind Microsoft and Eaton Vance National 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.