Correlation Between Microsoft and Strategy Shares

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

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

Diversification Opportunities for Microsoft and Strategy Shares

0.29

Correlation Coefficient

Microsoft  Strategy Shares

Modest diversification

The 3 months correlation between Microsoft and Strategy is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Strategy Shares Gold Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategy Shares Gold 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 Strategy Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategy Shares Gold has no effect on the direction of Microsoft i.e., Microsoft and Strategy Shares go up and down completely randomly.

Pair Corralation between Microsoft and Strategy Shares

If you would invest  41,493  in Microsoft on September 19, 2024 and sell it today you would earn a total of  3,953  from holding Microsoft or generate 9.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	4.76%
Values	Daily Returns

Microsoft  vs.  Strategy Shares Gold Hedged

Microsoft

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 4 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Strategy Shares Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Strategy Shares Gold Hedged has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Strategy Shares is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Strategy Shares

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

The idea behind Microsoft and Strategy Shares Gold Hedged 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.