Correlation Between Microsoft and Teberg Fund

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

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

Diversification Opportunities for Microsoft and Teberg Fund

0.29

Correlation Coefficient

Microsoft  Teberg Fund

Modest diversification

The 3 months correlation between Microsoft and Teberg is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and The Teberg Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teberg Fund 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 Teberg Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teberg Fund has no effect on the direction of Microsoft i.e., Microsoft and Teberg Fund go up and down completely randomly.

Pair Corralation between Microsoft and Teberg Fund

Given the investment horizon of 90 days Microsoft is expected to generate 1.33 times more return on investment than Teberg Fund. However, Microsoft is 1.33 times more volatile than The Teberg Fund. It trades about 0.51 of its potential returns per unit of risk. The Teberg Fund is currently generating about 0.15 per unit of risk. If you would invest  41,493  in Microsoft on September 19, 2024 and sell it today you would earn a total of  3,953  from holding Microsoft or generate 9.53% return on investment over 90 days.

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

Microsoft  vs.  The Teberg Fund

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

Teberg Fund

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Teberg Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Teberg Fund 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 Teberg Fund

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

The idea behind Microsoft and The Teberg Fund 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.