Correlation Between Microsoft and Pace Select

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

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

Diversification Opportunities for Microsoft and Pace Select

0.27

Correlation Coefficient

Microsoft  Pace Select

Modest diversification

The 3 months correlation between Microsoft and Pace is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Pace Select Advisors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace Select Advisors 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 Pace Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace Select Advisors has no effect on the direction of Microsoft i.e., Microsoft and Pace Select go up and down completely randomly.

Pair Corralation between Microsoft and Pace Select

Given the investment horizon of 90 days Microsoft is expected to under-perform the Pace Select. In addition to that, Microsoft is 4.58 times more volatile than Pace Select Advisors. It trades about -0.03 of its total potential returns per unit of risk. Pace Select Advisors is currently generating about 0.06 per unit of volatility. If you would invest  98.00  in Pace Select Advisors on September 30, 2024 and sell it today you would earn a total of  2.00  from holding Pace Select Advisors or generate 2.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Microsoft  vs.  Pace Select Advisors

Microsoft

Risk-Adjusted Performance

0 of 100

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 comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pace Select Advisors

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pace Select Advisors are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pace Select 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 Pace Select

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

The idea behind Microsoft and Pace Select Advisors 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.