Correlation Between Microsoft and M3 Brigade

Can any of the company-specific risk be diversified away by investing in both Microsoft and M3 Brigade 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 M3 Brigade into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and M3 Brigade Acquisition V, you can compare the effects of market volatilities on Microsoft and M3 Brigade 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 M3 Brigade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and M3 Brigade.

Diversification Opportunities for Microsoft and M3 Brigade

0.19

Correlation Coefficient

Microsoft  M3 Brigade

Average diversification

The 3 months correlation between Microsoft and MBAVW is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and M3 Brigade Acquisition V in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M3 Brigade 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 M3 Brigade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M3 Brigade Acquisition has no effect on the direction of Microsoft i.e., Microsoft and M3 Brigade go up and down completely randomly.

Pair Corralation between Microsoft and M3 Brigade

Given the investment horizon of 90 days Microsoft is expected to generate 47.84 times less return on investment than M3 Brigade. But when comparing it to its historical volatility, Microsoft is 8.12 times less risky than M3 Brigade. It trades about 0.02 of its potential returns per unit of risk. M3 Brigade Acquisition V is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  13.00  in M3 Brigade Acquisition V on September 20, 2024 and sell it today you would earn a total of  4.00  from holding M3 Brigade Acquisition V or generate 30.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	34.4%
Values	Daily Returns

Microsoft  vs.  M3 Brigade Acquisition V

Microsoft

Risk-Adjusted Performance

5 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 5 (%) 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.

M3 Brigade Acquisition

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in M3 Brigade Acquisition V are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, M3 Brigade showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and M3 Brigade

The main advantage of trading using opposite Microsoft and M3 Brigade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, M3 Brigade 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 M3 Brigade will offset losses from the drop in M3 Brigade's long position.

The idea behind Microsoft and M3 Brigade Acquisition V 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.