Correlation Between Microsoft and IA Clarington

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

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

Diversification Opportunities for Microsoft and IA Clarington

0.42

Correlation Coefficient

Microsoft  IA Clarington

Very weak diversification

The 3 months correlation between Microsoft and IFRF is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and IA Clarington Floating in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IA Clarington Floating 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 IA Clarington. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IA Clarington Floating has no effect on the direction of Microsoft i.e., Microsoft and IA Clarington go up and down completely randomly.

Pair Corralation between Microsoft and IA Clarington

Given the investment horizon of 90 days Microsoft is expected to under-perform the IA Clarington. In addition to that, Microsoft is 5.26 times more volatile than IA Clarington Floating. It trades about -0.1 of its total potential returns per unit of risk. IA Clarington Floating is currently generating about -0.2 per unit of volatility. If you would invest  833.00  in IA Clarington Floating on December 22, 2024 and sell it today you would lose (30.00) from holding IA Clarington Floating or give up 3.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Microsoft  vs.  IA Clarington Floating

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.

IA Clarington Floating

Risk-Adjusted Performance

Very Weak

Over the last 90 days IA Clarington Floating has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IA Clarington is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and IA Clarington

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

The idea behind Microsoft and IA Clarington Floating 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.