Correlation Between Microsoft and Short Nasdaq-100

Can any of the company-specific risk be diversified away by investing in both Microsoft and Short Nasdaq-100 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 Short Nasdaq-100 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and Short Nasdaq 100 Profund, you can compare the effects of market volatilities on Microsoft and Short Nasdaq-100 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 Short Nasdaq-100. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Short Nasdaq-100.

Diversification Opportunities for Microsoft and Short Nasdaq-100

-0.43

Correlation Coefficient

Microsoft  Short Nasdaq-100

Very good diversification

The 3 months correlation between Microsoft and Short is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Short Nasdaq 100 Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Nasdaq 100 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 Short Nasdaq-100. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Nasdaq 100 has no effect on the direction of Microsoft i.e., Microsoft and Short Nasdaq-100 go up and down completely randomly.

Pair Corralation between Microsoft and Short Nasdaq-100

Given the investment horizon of 90 days Microsoft is expected to under-perform the Short Nasdaq-100. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.07 times less risky than Short Nasdaq-100. The stock trades about -0.34 of its potential returns per unit of risk. The Short Nasdaq 100 Profund is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  3,761  in Short Nasdaq 100 Profund on October 15, 2024 and sell it today you would lose (210.00) from holding Short Nasdaq 100 Profund or give up 5.58% of portfolio value over 90 days.

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

Microsoft  vs.  Short Nasdaq 100 Profund

Microsoft

Risk-Adjusted Performance

0 of 100

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 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.

Short Nasdaq 100

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Short Nasdaq 100 Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Microsoft and Short Nasdaq-100

The main advantage of trading using opposite Microsoft and Short Nasdaq-100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Short Nasdaq-100 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 Short Nasdaq-100 will offset losses from the drop in Short Nasdaq-100's long position.

The idea behind Microsoft and Short Nasdaq 100 Profund 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.