Correlation Between Microsoft and Columbia Convertible

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

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

Diversification Opportunities for Microsoft and Columbia Convertible

0.48

Correlation Coefficient

Microsoft  Columbia Convertible

Very weak diversification

The 3 months correlation between Microsoft and Columbia is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Columbia Convertible Securitie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Convertible 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 Columbia Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Convertible has no effect on the direction of Microsoft i.e., Microsoft and Columbia Convertible go up and down completely randomly.

Pair Corralation between Microsoft and Columbia Convertible

Given the investment horizon of 90 days Microsoft is expected to under-perform the Columbia Convertible. In addition to that, Microsoft is 1.5 times more volatile than Columbia Convertible Securities. It trades about -0.22 of its total potential returns per unit of risk. Columbia Convertible Securities is currently generating about -0.15 per unit of volatility. If you would invest  2,267  in Columbia Convertible Securities on October 8, 2024 and sell it today you would lose (51.00) from holding Columbia Convertible Securities or give up 2.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Microsoft  vs.  Columbia Convertible Securitie

Microsoft

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 2 (%) 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.

Columbia Convertible

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Convertible Securities has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Microsoft and Columbia Convertible

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

The idea behind Microsoft and Columbia Convertible Securities 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.