Correlation Between Microsoft and Matrix

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

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

Diversification Opportunities for Microsoft and Matrix

-0.11

Correlation Coefficient

Microsoft  Matrix

Good diversification

The 3 months correlation between Microsoft and Matrix is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Matrix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matrix 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 Matrix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matrix has no effect on the direction of Microsoft i.e., Microsoft and Matrix go up and down completely randomly.

Pair Corralation between Microsoft and Matrix

Given the investment horizon of 90 days Microsoft is expected to generate 5.07 times less return on investment than Matrix. But when comparing it to its historical volatility, Microsoft is 1.29 times less risky than Matrix. It trades about 0.05 of its potential returns per unit of risk. Matrix is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  710,755  in Matrix on September 2, 2024 and sell it today you would earn a total of  111,845  from holding Matrix or generate 15.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	73.44%
Values	Daily Returns

Microsoft  vs.  Matrix

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.

Matrix

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Matrix are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Matrix sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Matrix

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

The idea behind Microsoft and Matrix 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.