Correlation Between Microsoft and Green Cures

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

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

Diversification Opportunities for Microsoft and Green Cures

-0.04

Correlation Coefficient

Microsoft  Green Cures

Good diversification

The 3 months correlation between Microsoft and Green is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Green Cures Botanical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Cures Botanical 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 Green Cures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Cures Botanical has no effect on the direction of Microsoft i.e., Microsoft and Green Cures go up and down completely randomly.

Pair Corralation between Microsoft and Green Cures

Given the investment horizon of 90 days Microsoft is expected to generate 137.92 times less return on investment than Green Cures. But when comparing it to its historical volatility, Microsoft is 37.57 times less risky than Green Cures. It trades about 0.05 of its potential returns per unit of risk. Green Cures Botanical is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  0.02  in Green Cures Botanical on August 31, 2024 and sell it today you would lose (0.01) from holding Green Cures Botanical or give up 50.0% of portfolio value over 90 days.

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

Microsoft  vs.  Green Cures Botanical

Microsoft

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 3 (%) 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.

Green Cures Botanical

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Green Cures Botanical are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Green Cures unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Green Cures

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

The idea behind Microsoft and Green Cures Botanical 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.