Correlation Between Microsoft and Timothy Aggressive

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

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

Diversification Opportunities for Microsoft and Timothy Aggressive

-0.04

Correlation Coefficient

Microsoft  Timothy Aggressive

Good diversification

The 3 months correlation between Microsoft and Timothy is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Timothy Aggressive Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timothy Aggressive Growth 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 Timothy Aggressive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timothy Aggressive Growth has no effect on the direction of Microsoft i.e., Microsoft and Timothy Aggressive go up and down completely randomly.

Pair Corralation between Microsoft and Timothy Aggressive

Given the investment horizon of 90 days Microsoft is expected to generate 0.5 times more return on investment than Timothy Aggressive. However, Microsoft is 1.99 times less risky than Timothy Aggressive. It trades about 0.22 of its potential returns per unit of risk. Timothy Aggressive Growth is currently generating about -0.17 per unit of risk. If you would invest  42,604  in Microsoft on September 15, 2024 and sell it today you would earn a total of  2,123  from holding Microsoft or generate 4.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Microsoft  vs.  Timothy Aggressive Growth

Microsoft

Risk-Adjusted Performance

4 of 100

Insignificant

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.

Timothy Aggressive Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timothy Aggressive Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Timothy Aggressive 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 Timothy Aggressive

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

The idea behind Microsoft and Timothy Aggressive Growth 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.