Correlation Between Microsoft and Raiffeisen Bank

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

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

Diversification Opportunities for Microsoft and Raiffeisen Bank

0.5

Correlation Coefficient

Microsoft  Raiffeisen Bank

Very weak diversification

The 3 months correlation between Microsoft and Raiffeisen is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Raiffeisen Bank International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raiffeisen Bank Inte 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 Raiffeisen Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raiffeisen Bank Inte has no effect on the direction of Microsoft i.e., Microsoft and Raiffeisen Bank go up and down completely randomly.

Pair Corralation between Microsoft and Raiffeisen Bank

Given the investment horizon of 90 days Microsoft is expected to generate 1.43 times less return on investment than Raiffeisen Bank. But when comparing it to its historical volatility, Microsoft is 2.81 times less risky than Raiffeisen Bank. It trades about 0.05 of its potential returns per unit of risk. Raiffeisen Bank International is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  499.00  in Raiffeisen Bank International on September 19, 2024 and sell it today you would earn a total of  11.00  from holding Raiffeisen Bank International or generate 2.2% return on investment over 90 days.

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

Microsoft  vs.  Raiffeisen Bank International

Microsoft

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 4 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Raiffeisen Bank Inte

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Raiffeisen Bank International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Raiffeisen Bank 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 Raiffeisen Bank

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

The idea behind Microsoft and Raiffeisen Bank International 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.