Correlation Between Microsoft and Hood River

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

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

Diversification Opportunities for Microsoft and Hood River

0.72

Correlation Coefficient

Microsoft  Hood River

Poor diversification

The 3 months correlation between Microsoft and Hood is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Hood River International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hood River International 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 Hood River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hood River International has no effect on the direction of Microsoft i.e., Microsoft and Hood River go up and down completely randomly.

Pair Corralation between Microsoft and Hood River

Given the investment horizon of 90 days Microsoft is expected to under-perform the Hood River. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.03 times less risky than Hood River. The stock trades about -0.2 of its potential returns per unit of risk. The Hood River International is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  1,238  in Hood River International on October 7, 2024 and sell it today you would lose (34.00) from holding Hood River International or give up 2.75% of portfolio value over 90 days.

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

Microsoft  vs.  Hood River International

Microsoft

Risk-Adjusted Performance

3 of 100

Insignificant

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.

Hood River International

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hood River International are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Hood River may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Microsoft and Hood River

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

The idea behind Microsoft and Hood River International 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.