Correlation Between Microsoft and Pace Intermediate

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

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

Diversification Opportunities for Microsoft and Pace Intermediate

-0.78

Correlation Coefficient

Microsoft  Pace Intermediate

Pay attention - limited upside

The 3 months correlation between Microsoft and Pace is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Pace Intermediate Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace Intermediate Fixed 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 Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace Intermediate Fixed has no effect on the direction of Microsoft i.e., Microsoft and Pace Intermediate go up and down completely randomly.

Pair Corralation between Microsoft and Pace Intermediate

Given the investment horizon of 90 days Microsoft is expected to under-perform the Pace Intermediate. In addition to that, Microsoft is 5.37 times more volatile than Pace Intermediate Fixed. It trades about -0.08 of its total potential returns per unit of risk. Pace Intermediate Fixed is currently generating about 0.1 per unit of volatility. If you would invest  1,033  in Pace Intermediate Fixed on December 29, 2024 and sell it today you would earn a total of  19.00  from holding Pace Intermediate Fixed or generate 1.84% return on investment over 90 days.

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

Microsoft  vs.  Pace Intermediate Fixed

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.

Pace Intermediate Fixed

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pace Intermediate Fixed are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pace Intermediate 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 Intermediate

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

The idea behind Microsoft and Pace Intermediate Fixed 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.