Correlation Between Microsoft and Leisure Fund

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

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

Diversification Opportunities for Microsoft and Leisure Fund

0.22

Correlation Coefficient

Microsoft  Leisure Fund

Modest diversification

The 3 months correlation between Microsoft and Leisure is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Leisure Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leisure Fund Investor 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 Leisure Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leisure Fund Investor has no effect on the direction of Microsoft i.e., Microsoft and Leisure Fund go up and down completely randomly.

Pair Corralation between Microsoft and Leisure Fund

Given the investment horizon of 90 days Microsoft is expected to generate 3.07 times less return on investment than Leisure Fund. In addition to that, Microsoft is 1.8 times more volatile than Leisure Fund Investor. It trades about 0.06 of its total potential returns per unit of risk. Leisure Fund Investor is currently generating about 0.34 per unit of volatility. If you would invest  8,440  in Leisure Fund Investor on September 13, 2024 and sell it today you would earn a total of  1,352  from holding Leisure Fund Investor or generate 16.02% 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.  Leisure Fund Investor

Microsoft

Risk-Adjusted Performance

4 of 100

Modest

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Leisure Fund Investor

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Leisure Fund Investor are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Leisure Fund showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Leisure Fund

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

The idea behind Microsoft and Leisure Fund Investor 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.