Correlation Between Microsoft and Global Warming

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

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

Diversification Opportunities for Microsoft and Global Warming

0.06

Correlation Coefficient

Microsoft  Global Warming

Significant diversification

The 3 months correlation between Microsoft and Global is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Global Warming Solut in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Warming Solut 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 Global Warming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Warming Solut has no effect on the direction of Microsoft i.e., Microsoft and Global Warming go up and down completely randomly.

Pair Corralation between Microsoft and Global Warming

Given the investment horizon of 90 days Microsoft is expected to generate 0.07 times more return on investment than Global Warming. However, Microsoft is 14.05 times less risky than Global Warming. It trades about 0.49 of its potential returns per unit of risk. Global Warming Solut is currently generating about -0.01 per unit of risk. If you would invest  41,493  in Microsoft on September 18, 2024 and sell it today you would earn a total of  3,666  from holding Microsoft or generate 8.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Microsoft  vs.  Global Warming Solut

Microsoft

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 5 (%) 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.

Global Warming Solut

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Warming Solut are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Global Warming displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Global Warming

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

The idea behind Microsoft and Global Warming Solut 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.