Correlation Between Microsoft and Item 9

Can any of the company-specific risk be diversified away by investing in both Microsoft and Item 9 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 Item 9 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and Item 9 Labs, you can compare the effects of market volatilities on Microsoft and Item 9 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 Item 9. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Item 9.

Diversification Opportunities for Microsoft and Item 9

0.03

Correlation Coefficient

Microsoft  Item 9

Significant diversification

The 3 months correlation between Microsoft and Item is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Item 9 Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Item 9 Labs 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 Item 9. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Item 9 Labs has no effect on the direction of Microsoft i.e., Microsoft and Item 9 go up and down completely randomly.

Pair Corralation between Microsoft and Item 9

If you would invest  42,218  in Microsoft on September 13, 2024 and sell it today you would earn a total of  2,738  from holding Microsoft or generate 6.49% return on investment over 90 days.

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

Microsoft  vs.  Item 9 Labs

Microsoft

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 4 (%) 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.

Item 9 Labs

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Item 9 Labs are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Item 9 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Item 9

The main advantage of trading using opposite Microsoft and Item 9 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Item 9 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 Item 9 will offset losses from the drop in Item 9's long position.

The idea behind Microsoft and Item 9 Labs 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.