Correlation Between Microsoft and CTS Eventim

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

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

Diversification Opportunities for Microsoft and CTS Eventim

-0.79

Correlation Coefficient

Microsoft  CTS Eventim

Pay attention - limited upside

The 3 months correlation between Microsoft and CTS is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and CTS Eventim AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTS Eventim AG 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 CTS Eventim. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTS Eventim AG has no effect on the direction of Microsoft i.e., Microsoft and CTS Eventim go up and down completely randomly.

Pair Corralation between Microsoft and CTS Eventim

Given the investment horizon of 90 days Microsoft is expected to under-perform the CTS Eventim. In addition to that, Microsoft is 1.07 times more volatile than CTS Eventim AG. It trades about -0.08 of its total potential returns per unit of risk. CTS Eventim AG is currently generating about 0.24 per unit of volatility. If you would invest  8,200  in CTS Eventim AG on December 28, 2024 and sell it today you would earn a total of  1,930  from holding CTS Eventim AG or generate 23.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.77%
Values	Daily Returns

Microsoft  vs.  CTS Eventim AG

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 latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

CTS Eventim AG

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CTS Eventim AG are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, CTS Eventim reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and CTS Eventim

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

The idea behind Microsoft and CTS Eventim AG 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.