Correlation Between Microsoft and Integral Acquisition

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

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

Diversification Opportunities for Microsoft and Integral Acquisition

0.19

Correlation Coefficient

Microsoft  Integral Acquisition

Average diversification

The 3 months correlation between Microsoft and Integral is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Integral Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Integral Acquisition 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 Integral Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Integral Acquisition has no effect on the direction of Microsoft i.e., Microsoft and Integral Acquisition go up and down completely randomly.

Pair Corralation between Microsoft and Integral Acquisition

Given the investment horizon of 90 days Microsoft is expected to generate 666.42 times less return on investment than Integral Acquisition. But when comparing it to its historical volatility, Microsoft is 182.39 times less risky than Integral Acquisition. It trades about 0.05 of its potential returns per unit of risk. Integral Acquisition is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  4.59  in Integral Acquisition on September 3, 2024 and sell it today you would lose (4.55) from holding Integral Acquisition or give up 99.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	29.69%
Values	Daily Returns

Microsoft  vs.  Integral Acquisition

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.

Integral Acquisition

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Integral Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal technical and fundamental indicators, Integral Acquisition showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Integral Acquisition

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

The idea behind Microsoft and Integral Acquisition 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.