Correlation Between Microsoft and Rising Rates

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

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

Diversification Opportunities for Microsoft and Rising Rates

0.33

Correlation Coefficient

Microsoft  Rising Rates

Weak diversification

The 3 months correlation between Microsoft and RISING is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Rising Rates Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rising Rates Opportunity 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 Rising Rates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rising Rates Opportunity has no effect on the direction of Microsoft i.e., Microsoft and Rising Rates go up and down completely randomly.

Pair Corralation between Microsoft and Rising Rates

Given the investment horizon of 90 days Microsoft is expected to under-perform the Rising Rates. In addition to that, Microsoft is 1.3 times more volatile than Rising Rates Opportunity. It trades about -0.08 of its total potential returns per unit of risk. Rising Rates Opportunity is currently generating about -0.03 per unit of volatility. If you would invest  1,407  in Rising Rates Opportunity on October 3, 2024 and sell it today you would lose (10.00) from holding Rising Rates Opportunity or give up 0.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Microsoft  vs.  Rising Rates Opportunity

Microsoft

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 2 (%) 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.

Rising Rates Opportunity

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rising Rates Opportunity are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Rising Rates 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 Rising Rates

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

The idea behind Microsoft and Rising Rates Opportunity 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.