Correlation Between Microsoft and Pimco Low

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

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

Diversification Opportunities for Microsoft and Pimco Low

-0.87

Correlation Coefficient

Microsoft  Pimco Low

Pay attention - limited upside

The 3 months correlation between Microsoft and Pimco is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Pimco Low Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Low Duration 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 Pimco Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Low Duration has no effect on the direction of Microsoft i.e., Microsoft and Pimco Low go up and down completely randomly.

Pair Corralation between Microsoft and Pimco Low

Given the investment horizon of 90 days Microsoft is expected to under-perform the Pimco Low. In addition to that, Microsoft is 11.0 times more volatile than Pimco Low Duration. It trades about -0.11 of its total potential returns per unit of risk. Pimco Low Duration is currently generating about 0.3 per unit of volatility. If you would invest  792.00  in Pimco Low Duration on December 29, 2024 and sell it today you would earn a total of  21.00  from holding Pimco Low Duration or generate 2.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  Pimco Low Duration

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.

Pimco Low Duration

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Low Duration are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Pimco Low 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 Pimco Low

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

The idea behind Microsoft and Pimco Low Duration 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .