Correlation Between Microsoft and Virtus Kar

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

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

Diversification Opportunities for Microsoft and Virtus Kar

0.25

Correlation Coefficient

Microsoft  Virtus Kar

Modest diversification

The 3 months correlation between Microsoft and Virtus is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Virtus Kar Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Kar Small 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 Virtus Kar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Kar Small has no effect on the direction of Microsoft i.e., Microsoft and Virtus Kar go up and down completely randomly.

Pair Corralation between Microsoft and Virtus Kar

Given the investment horizon of 90 days Microsoft is expected to generate 3.65 times less return on investment than Virtus Kar. In addition to that, Microsoft is 1.09 times more volatile than Virtus Kar Small Cap. It trades about 0.05 of its total potential returns per unit of risk. Virtus Kar Small Cap is currently generating about 0.2 per unit of volatility. If you would invest  3,470  in Virtus Kar Small Cap on September 2, 2024 and sell it today you would earn a total of  542.00  from holding Virtus Kar Small Cap or generate 15.62% 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.  Virtus Kar Small Cap

Microsoft

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 3 (%) 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.

Virtus Kar Small

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Kar Small Cap are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Virtus Kar showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Virtus Kar

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

The idea behind Microsoft and Virtus Kar Small Cap 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.