Correlation Between Microsoft and Tax-exempt Fund

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

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

Diversification Opportunities for Microsoft and Tax-exempt Fund

-0.05

Correlation Coefficient

Microsoft  Tax-exempt Fund

Good diversification

The 3 months correlation between Microsoft and Tax-exempt is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Tax Exempt Fund Of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Exempt 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 Tax-exempt Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Exempt Fund has no effect on the direction of Microsoft i.e., Microsoft and Tax-exempt Fund go up and down completely randomly.

Pair Corralation between Microsoft and Tax-exempt Fund

Given the investment horizon of 90 days Microsoft is expected to under-perform the Tax-exempt Fund. In addition to that, Microsoft is 6.24 times more volatile than Tax Exempt Fund Of. It trades about -0.08 of its total potential returns per unit of risk. Tax Exempt Fund Of is currently generating about -0.02 per unit of volatility. If you would invest  1,688  in Tax Exempt Fund Of on December 1, 2024 and sell it today you would lose (4.00) from holding Tax Exempt Fund Of or give up 0.24% of portfolio value over 90 days.

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

Microsoft  vs.  Tax Exempt Fund Of

Microsoft

Risk-Adjusted Performance

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 latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Tax Exempt Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tax Exempt Fund Of has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Tax-exempt 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 Tax-exempt Fund

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

The idea behind Microsoft and Tax Exempt Fund Of 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.