Correlation Between Microsoft and NATIONAL INVESTMENT

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

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

Diversification Opportunities for Microsoft and NATIONAL INVESTMENT

0.22

Correlation Coefficient

Microsoft  NATIONAL INVESTMENT

Modest diversification

The 3 months correlation between Microsoft and NATIONAL is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and NATIONAL INVESTMENT TRUST in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NATIONAL INVESTMENT TRUST 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 NATIONAL INVESTMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NATIONAL INVESTMENT TRUST has no effect on the direction of Microsoft i.e., Microsoft and NATIONAL INVESTMENT go up and down completely randomly.

Pair Corralation between Microsoft and NATIONAL INVESTMENT

Given the investment horizon of 90 days Microsoft is expected to generate 3.13 times less return on investment than NATIONAL INVESTMENT. But when comparing it to its historical volatility, Microsoft is 3.22 times less risky than NATIONAL INVESTMENT. It trades about 0.05 of its potential returns per unit of risk. NATIONAL INVESTMENT TRUST is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,010  in NATIONAL INVESTMENT TRUST on September 15, 2024 and sell it today you would earn a total of  90.00  from holding NATIONAL INVESTMENT TRUST or generate 8.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  NATIONAL INVESTMENT TRUST

Microsoft

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 4 (%) 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.

NATIONAL INVESTMENT TRUST

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NATIONAL INVESTMENT TRUST are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, NATIONAL INVESTMENT exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and NATIONAL INVESTMENT

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

The idea behind Microsoft and NATIONAL INVESTMENT TRUST 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.