Correlation Between Microsoft and Shimmick Common

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

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

Diversification Opportunities for Microsoft and Shimmick Common

0.56

Correlation Coefficient

Microsoft  Shimmick Common

Very weak diversification

The 3 months correlation between Microsoft and Shimmick is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Shimmick Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shimmick Common 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 Shimmick Common. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shimmick Common has no effect on the direction of Microsoft i.e., Microsoft and Shimmick Common go up and down completely randomly.

Pair Corralation between Microsoft and Shimmick Common

Given the investment horizon of 90 days Microsoft is expected to under-perform the Shimmick Common. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 7.28 times less risky than Shimmick Common. The stock trades about -0.05 of its potential returns per unit of risk. The Shimmick Common is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  163.00  in Shimmick Common on October 3, 2024 and sell it today you would earn a total of  96.00  from holding Shimmick Common or generate 58.9% return on investment over 90 days.

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

Microsoft  vs.  Shimmick Common

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.

Shimmick Common

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shimmick Common are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, Shimmick Common may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Microsoft and Shimmick Common

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

The idea behind Microsoft and Shimmick Common 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.