Correlation Between Microsoft and Us Defensive

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

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

Diversification Opportunities for Microsoft and Us Defensive

0.46

Correlation Coefficient

Microsoft  Us Defensive

Very weak diversification

The 3 months correlation between Microsoft and REUYX is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Us Defensive Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Defensive Equity 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 Us Defensive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Defensive Equity has no effect on the direction of Microsoft i.e., Microsoft and Us Defensive go up and down completely randomly.

Pair Corralation between Microsoft and Us Defensive

Given the investment horizon of 90 days Microsoft is expected to under-perform the Us Defensive. In addition to that, Microsoft is 1.89 times more volatile than Us Defensive Equity. It trades about -0.11 of its total potential returns per unit of risk. Us Defensive Equity is currently generating about -0.07 per unit of volatility. If you would invest  4,416  in Us Defensive Equity on December 30, 2024 and sell it today you would lose (169.00) from holding Us Defensive Equity or give up 3.83% of portfolio value over 90 days.

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

Microsoft  vs.  Us Defensive Equity

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.

Us Defensive Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Us Defensive Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Us Defensive 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 Us Defensive

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

The idea behind Microsoft and Us Defensive Equity 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.