Correlation Between Microsoft and Msvif Mid

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

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

Diversification Opportunities for Microsoft and Msvif Mid

0.54

Correlation Coefficient

Microsoft  Msvif Mid

Very weak diversification

The 3 months correlation between Microsoft and Msvif is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Msvif Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Msvif Mid Cap 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 Msvif Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Msvif Mid Cap has no effect on the direction of Microsoft i.e., Microsoft and Msvif Mid go up and down completely randomly.

Pair Corralation between Microsoft and Msvif Mid

Given the investment horizon of 90 days Microsoft is expected to generate 0.61 times more return on investment than Msvif Mid. However, Microsoft is 1.64 times less risky than Msvif Mid. It trades about 0.2 of its potential returns per unit of risk. Msvif Mid Cap is currently generating about 0.04 per unit of risk. If you would invest  41,466  in Microsoft on September 21, 2024 and sell it today you would earn a total of  2,194  from holding Microsoft or generate 5.29% return on investment over 90 days.

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

Microsoft  vs.  Msvif Mid Cap

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) 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.

Msvif Mid Cap

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Msvif Mid Cap are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Msvif Mid showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Msvif Mid

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

The idea behind Microsoft and Msvif Mid Cap 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.