Correlation Between Microsoft and Nuveen Ultra

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

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

Diversification Opportunities for Microsoft and Nuveen Ultra

-0.85

Correlation Coefficient

Microsoft  Nuveen Ultra

Pay attention - limited upside

The 3 months correlation between Microsoft and Nuveen is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Nuveen Ultra Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Ultra Short 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 Nuveen Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Ultra Short has no effect on the direction of Microsoft i.e., Microsoft and Nuveen Ultra go up and down completely randomly.

Pair Corralation between Microsoft and Nuveen Ultra

Given the investment horizon of 90 days Microsoft is expected to under-perform the Nuveen Ultra. In addition to that, Microsoft is 80.11 times more volatile than Nuveen Ultra Short. It trades about -0.11 of its total potential returns per unit of risk. Nuveen Ultra Short is currently generating about 0.93 per unit of volatility. If you would invest  2,501  in Nuveen Ultra Short on December 29, 2024 and sell it today you would earn a total of  29.00  from holding Nuveen Ultra Short or generate 1.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Microsoft  vs.  Nuveen Ultra Short

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Nuveen Ultra Short

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Ultra Short are ranked lower than 73 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Nuveen Ultra is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Nuveen Ultra

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

The idea behind Microsoft and Nuveen Ultra Short 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.