Correlation Between Microsoft and Immofonds

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

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

Diversification Opportunities for Microsoft and Immofonds

0.53

Correlation Coefficient

Microsoft  Immofonds

Very weak diversification

The 3 months correlation between Microsoft and Immofonds is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Immofonds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Immofonds 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 Immofonds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Immofonds has no effect on the direction of Microsoft i.e., Microsoft and Immofonds go up and down completely randomly.

Pair Corralation between Microsoft and Immofonds

Given the investment horizon of 90 days Microsoft is expected to generate 1.6 times less return on investment than Immofonds. In addition to that, Microsoft is 1.52 times more volatile than Immofonds. It trades about 0.11 of its total potential returns per unit of risk. Immofonds is currently generating about 0.27 per unit of volatility. If you would invest  56,800  in Immofonds on September 27, 2024 and sell it today you would earn a total of  2,400  from holding Immofonds or generate 4.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Microsoft  vs.  Immofonds

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Immofonds

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Immofonds are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Immofonds may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Microsoft and Immofonds

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

The idea behind Microsoft and Immofonds 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.